GBP Rallies on Better Data

GBPUSD continues to push higher ahead of the weekend with GBP sentiment bolstered by better UK data. Today, retail sales were seen rising 0.5%, while a touch below the 0.6% the market was looking for, the data still marks a sharp improvement on the prior month’s -0.9% reading. Earlier this week, prelim Q2 UK GDP was seen rising by 0.6% while the monthly figure held flat, both in line with expectations. Broadly, UK data has been more encouraging this week with the jobless rate seen falling back to 4.2% from 4.4% prior, reflecting a tighter jobs market.

BOE Easing Expectations

The big question for GBP traders now, is the extent to which the BOE is likely to ease further over the remainder of the year. CPI was seen rising to 2.2% in July, up from 2% prior. Though less than expected, with inflation moving back above the bank’s target, there are some questions hanging over the rates outlook in the UK. If inflation continues to grind higher, BOE easing expectations are likely to be pushed out near-term creating further demand for GBP, particularly against USD where Fed easing expectations have risen in line with a further drop in inflation. Looking ahead, traders will be scrutinising comments from BOE’s Bailey at Jackson Hole next week for clues as to how the bank is likely to act in coming months.

Technical Views

GBPUSD

The rally in GBPUSD has seen the market breaking back above the 1.2832 level and back inside the bull channel. While above this area and with momentum studies bullish, the focus is on a continuation higher with 1.30 the next objective for bulls.