Retail Sales Drop Sharply
The British Pound has come under heavy selling pressure today amidst a sea of red UK data this morning. Retail Sales were seen contracting 0.7% last month, down sharply from the prior month’s reading of 0.1% and below the -0.3% the market was looking for. The decline marks the sharpest drop in retail activity in four months and coming on the back of a sharp jump in inflation over the same month, the picture for UK households looks much weaker in Q4.
UK PMI Plunge
Following this data, the latest round of UK PMI readings was also seen coming in below forecasts. The factory sector reading was seen falling to 48.6 from 49.9, despite forecasts for a lift to 50, with manufacturing activity seen moving deeper into negative territory. The services PMI was also below forecasts at 50, down from 52 prior and below the 51.9 the market was looking for.
BOE Easing Expectations
Against a backdrop of weaker UK data, the case for further BOE easing should be clear. However, the sharp uptick in October inflation muddies the outlook somewhat with the BOE keen to avoid pushing inflation up further by cutting rates again. As such, expectations for a December cut remain split. Incoming inflation data ahead of that meeting will prove key with the bank needing to see a softening of inflation before actioning a further cut. Despite this, GBPUSD risks remain skewed to the downside near-term with USD continuing to rally.
Technical Views
GBPUSD
The sell off has seen the market breaking down through several key support levels recently. Price is now testing below the bull trend line from 2023 lows and with momentum studies bearish, the focus is on a test of the 1.2337 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.