GBP/USD Keeps Trading Under 1.2900 Ahead of US Open While Data from the UK Weakens Bank of England Policy Outlook
The lowest trading Point Struck
The downward trading pattern of the GBP/USD currency pair continued on Friday as it went under the 1.2900 zones as the US market prepared to open for business. The pair has dropped over 1% from more than 1.3000 it was at early in the United Kingdom after it had a poor flow of data coming in.
GBP/USD price chart. Source TradingView
The pair struck its lowest point since the fourth quarter of 2020 in the region of 1.2960 at a point as it came very close to running a test of the low point of November 2020 at 1.2960. Bearish investors for the long-term might be forced to wait out the pair’s retracement towards points above 1.2900 and then aim to run a test of the resistance right below 1.3000 before it adds to a short-term position again.
In a recap of the data from the United Kingdom on Friday, the March retail sales fell by 1.4% month-on-month, which was more improved than the estimated value at 0.3%. The consumer confidence for the country in the month of April came in at its second worse recording in more than 50 years of keeping the record. The flash Purchasing Managers Index survey result for April equally missed the mark of the expectation placed on it. The total set of data released on Friday shows the effect of the worsening situation in the cost of living in the United Kingdom as households are now squeezed tight by declining values in wages and increased taxes.
Financial analysts have sounded a note warning that the health of consumers and consumption rate in the United Kingdom might as well fall deeper later in the year, which might just undermine the argument for the important policy fastening expected from the Bank of England. Meanwhile, policymakers at the Bank of England are getting more concerned over economic shortfalls arising from the squeeze on the cost of living.
The warnings from financial analysts over the money market that presently point to another 167 basis points interest rate this year from the Bank of England is an excessive one. While this becomes the broader market’s view, there is less argument for a break above 1.3000 for the GBP/USD currency pair.
Another factor that might cause a downward risk for the British pound is the increasing discontent with the British Prime Minister within the Conservative Party. It is reported that some Members of Parliament in the party are already putting together a letter of No Confidence against the May elections.