GBP/USD off weekly tops on UK politics, US Retail Sales in focus

• GBP/USD looks for fresh direction amid the UK’s political plays challenging the PM.
• Brussels launched legal action against the British government, polls keep Conservatives on the top, though with a hung parliament.
• US-China trade sentiment improves ahead of today’s call between the diplomats.

With the British politicians gearing up for December 15 election, the GBP/USD pair pulls back from the weekly highs and traded with a mild negative bias during the early European session on Friday.

The recent polls showing a hung parliament in the United Kingdom (UK) and the European Union’s (EU) legal action against Britain over the Prime Minister’s (PM) failure to nominate a new  EU  commissioner to send to Brussels seem to weigh on the British Pound off-late. However, the Conservatives are still not affected by the Labour’s “free broadband” pledge.

On the other hand, the market’s risk-tone has been a lighter recently after the White House Economic Adviser said the United States (US) and China are getting closer to a deal. Also increasing the trade optimism are headlines from Fox Business and Politico that suggests the Chinese part is also working towards a deal and both the parties are up for a call sometime in the day.

The recent comments from the Federal Reserve (Fed) officials keep praising the current monetary policy with Chairman Jerome Powell accusing trade protectionism to negatively affect the economy’s manufacturing system.

Moving on, investors will keep an eye over the US economic calendar, considering no data/events up for publishing from the UK’s side. Though, British politics and the US-China trade headlines could keep entertaining traders.

Concerning the US events, October month Retail Sales become the key followed by New York Empire State Manufacturing Index and Industrial production. TD Securities said, “We look for retail sales to register a soft 0.1% gain for October as a decline in auto sales likely kept headline sales subdued. However, we expect a rebound in the control group to be the main driver of headline growth, reflecting still-solid consumer spending. Separately, industrial production likely tumbled -0.4% in October owing to a sharp slide in manufacturing activities, which were impacted by the GM strike. Lastly, the NY Empire manufacturing survey will give us a first indication of the performance of the sector in November. The consensus is looking for a modest increase to 6.0 from 4.0 in October.”

Technical Analysis

Unless breaking a three-week-old falling trend line, near 1.2930, chances of pair’s run-up to 1.3000 and the previous month top near 1.3016 seem too less. As a result, sellers will be on the lookout for any declines below 1.2770/65 while aiming 1.2700.