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  • The UK’s economy is doing relatively well, which could mean more inflation-taming-hikes.
  • There is political uncertainty in the UK.
  • The price is ranging on the charts.

After positive UK retail sales data, the GBP/USD outlook pushed slightly higher on Friday. Retail sales for May came in higher than the expected -0.7% at -0.5%. This data indicated a rise in economic activity through increased consumer spending. This news comes after June’s positive UK PMI data was released yesterday. However, all this good news is being weighed down by political risks and recession concerns.

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These numbers favor the UK’s economic outlook, enabling the Bank of England to keep up its aggressive fight against inflation.

“it is a relief to the market that the UK services PMI was not weaker due to the long Jubilee weekend,” said Jane Foley, head of FX strategy at Rabobank in London.

Investors were also careful in the markets as the UK’s ruling Conservative Party was contesting two by-elections yesterday. A defeat could lead to the ousting of Prime Minister Boris Johnson after months of scandal.

“Losses for the Tories today will contribute to the ongoing clouds hanging over the PM’s prospects as party leader,” said Rabobank’s Foley.

GBP/USD key events today

GBP/USD investors will pay attention to speeches from two members of the Bank of England’s Monetary Policy Committee (MPC), which might contain clues on future rate hikes.

From the US, there will be new home sales data, which will indicate the state of the housing sector and the economy at large. This data measures the percentage change in new home sales.

GBP/USD technical outlook: Short-term bulls might retest 1.2405

GBP/USD outlook

Looking at the 4-hour chart, the price has pushed slightly above the 30-SMA after experiencing support at 1.2200, which is a psychological level. The price is caught between the recent swing high at 1.24057 and the swing low at 1.19337. The price is trading very close to the 30-SMA in a sideways move, with short-term bears pushing it higher. RSI favors bulls as it is trading above 50.

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If bulls can gain more momentum, we could see them pushing the price to retest the recent swing high and possibly break above. However, bearish momentum would push the price below the SMA to retest the recent swing low.

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