- Upbeat UK annualized CPI figures offer some impetus to the GBP bulls.
- The bounce appears short-lived amid stronger US dollar and moderate risk-aversion.
- Cable might derive support from downbeat US retail sales report.
The GBP/USD pair reversed a knee-jerk dip to fresh session lows at 1.2698 following the release of the UK CPI report and regained the 1.27 handle, as markets digested the upbeat annualized CPI reading.
However, the bulls appear to lack momentum, as easing UK wage growth combined with steady inflation raise concerns over the UK economic growth prospects and BOE rate hike outlook.
Moreover, escalating tensions between the US and Turkey continue to dampen risk sentiment and weigh negatively on the risk currency, the GBP. According to the latest report by CNN, one Turkish court rejected lawyer appeal to release the US Pastor Brunson from house arrest and for his travel ban to be lifted on Wednesday. Earlier today, Turkey doubles the tariffs on some US tariffs in response to the attacks on the economy by the US.
Cable also remains exposed to further downside risks amid Brexit uncertainty, especially after the Latvian Foreign Minister Rinkevics noted that the chances of a no Brexit deal now stands at 50-50.
With the UK data out of the way, the focus now shifts to the US retail sales report due at 1230 GMT, which is likely to show that the US retail volumes have dropped to 0.1% m/m in July versus 0.5% previous. Core retail sales are seen at 0.3% m/m versus 0.4% last.
GBP/USD Technical Levels
According to the AceTrader Research Team, “Today, y’day’s break of last Fri’s 1.2723 low to 1.2704 confirms MT fall has once again resumed, ‘bullish convergences’ on hourly indicators are likely to limit downside to 1.2670/75 n minor sup 1.26236 would remain intact. Only above 1.2760/64 signals temp. low is made n may risk stronger retrace to 1.2810/20.”
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