The Pound Sterling (GBP) performs strongly against its major peers on Friday. The British currency strengthens as the United Kingdom (UK) Retail Sales data for August came in stronger than expected. The Retail Sales data, a key measure of consumer spending, rose at a robust pace of 2.5% on year, higher than the estimates of 1.4% and July’s print of 1.5%. On month, Retail Sales grew by 1% against expectations of 0.4% and the 0.5% advance registered in July.
The report showed that households spent heavily on textile clothing and footwear stores and food stores, while sales receipts at other non-food stores declined. Signs of robust demand for durable items could further fuel price pressures, a potential concern after core inflation already came in hotter-than-expected in August. The persistence of high price growth in certain parts of the economy guided the Bank of England (BoE) to leave interest rates unchanged at 5% in Thursday’s policy meeting.
The BoE kept its borrowing rates steady, with an 8-1 vote split. BoE external policy member Swati Dhingra was the only one among the Monetary Policy Committee (MPC) members who voted to cut interest rates by 25 basis points (bps) for the second time in a row. Investors were expecting that Deputy Governor Dave Ramsden would also vote for a cut, but he didn't.
Also, BoE members unanimously voted to trim their government bonds holdings by 100 billion pounds over the coming 12 months.
Meanwhile, BoE external policy member Catherine Mann has supported maintaining a restrictive policy stance for a long once inflation risks are contained, in her speech in the European session.
The Pound Sterling aims to gain firm-footing above 1.3300 against the US Dollar in European trading hours. The near-term outlook of the GBP/USD pair remains firm as it holds above the 20-day Exponential Moving Average (EMA) near 1.3150. Earlier, the Cable strengthened after recovering from a corrective move to near the trendline plotted from the December 28, 2023, high of 1.2828, from where it delivered a sharp increase after a breakout on August 21.
The 14-day Relative Strength Index (RSI) shifts above 60.00, suggesting an active bullish momentum
Looking up, the Cable will face resistance near the psychological level of 1.3500. On the downside, the psychological level of 1.3000 emerges as crucial support.
The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.
Read more.Last release: Thu Sep 19, 2024 11:00
Frequency: Irregular
Actual: 5%
Consensus: 5%
Previous: 5%
Source: Bank of England
Keep up with the financial markets, know what's happening and what is affecting the markets with our latest market updates. Analyze market movers, trends and build your trading strategies accordingly.