At the end of last week's trading, the price of the British pound fell against the currencies of the euro, the dollar and others, as British retail sales disturbed the economic waters. According to the trading, the British pound retreated from its recent gains against the euro, the dollar and other currencies in the last session of the week after reporting that British retail sales fell more than expected in July with declines in most product categories. This was partly attributed to rainy weather and clouds during the period. The GBP/USD losses reached the support level at 1.2688, before closing trading around the 1.2730 level.
According to the official announcement, British retail sales fell by -1.2% last month when measured by volume or number of items sold and by -1% when measured by value or sale prices, with both figures falling short of economists' expectations for smaller declines with total sales volume taking some. -1.8% is back below the pre-pandemic level. Sales were 16.4% higher than the pre-pandemic level when measured at selling prices, reflecting the increased cost of energy, staff and other inputs, despite the volume or number of items sold that the Office for National Statistics uses when measuring growth in the overall economy.
Meanwhile, the economy and some households and retail spending may be helped in October when a scheduled reduction in OFGEM price ceilings is set to ease downward pressure on incomes for households not tied to term energy contracts. Spending was also supported by a nearly 10% increase in the national minimum wage in April, wage growth in parts of the private sector and public sector salary increases, which have lifted average wage packages by record amounts in recent months.
Many analysts and economists have reiterated expectations for further increases in the Bank of England rate after the employment data and inflation figures indicated significant moderation last month but slightly less than the economist consensus indicates. In addition, the more important core inflation rate - which tends to follow the general rate - remained unchanged at 6.8% rather than declining to 6.7%, but largely due to increases in housing costs linked to interest rates, hotel rates and air fares. In addition, the bank rate has already increased from 0.1% to 5.25% between December 2021 and August 2023, placing a heavy burden on the incomes of businesses and households at a time when average household energy bills remain around £1,500 higher than in April 2020 even with Expect a lower October.
Sterling forecast against the dollar today:
- According to the performance on the daily chart below, there is a cautious constancy in the performance of the price of the GBP/USD currency pair.
- The stronger tendency is still bearish
- The bears will gain more control if the currency pair moves towards the support levels 1.2610 and 1.2550, respectively, which are sufficient at the same time to push the indices in the technical direction towards strong oversold levels.
Over the same time period, there will be a first break of the downward movement, if the currency pair moves towards the resistance levels at 1.2850 and the psychological top at 1.3000, respectively.
I expect a quiet trading session today, as investors and markets will await the statements of global central bank officials during the Jackson Hole Symposium organized by the US Central Bank.
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