- The British Pound has shown significant resilience against recent strength in the US Dollar compared to other major currencies, stabilizing around the 1.2724 level at the time of this analysis.
- The Pound remains steadfast despite the announcement last week of a decline in UK retail sales in December, amid ongoing holiday season and persistent stubborn inflation. According to the Office for National Statistics (ONS), UK retail sales fell by -3.2% in December after rising by 1.3% in the previous month.
- Moreover, economists had expected the figures to come in at -0.5%, translating this performance into a year-on-year increase of 1.2%.
Meanwhile, the core Consumer Price Index (CPI), which excludes volatile food and energy products, decreased by 3.3%, leading to a 2.1% year-on-year decline. Obviously, these figures are crucial because consumer spending is a significant part of the UK economy. They indicated that sales dropped to their lowest level since 2022. Also, this data came two days after the National Statistics Office released strong inflation figures. The report stated that the main Consumer Price Index rose from 3.9% in November to 4.0% in December. Additionally, the core Consumer Price Index increased by 5.1%, ending the previous downward trend.
Furthermore, the UK reported additional strong numbers, with Rightmove stating that asking prices for homes in the UK continued to rise. Separate reports from Halifax and Nationwide showed that the House Price Index (HPI) jumped in December, rising for the third consecutive month. Also, British retail traders performed well, outperforming their American counterparts like Walmart and Target. Tesco, the largest British retailer, hovered near its all-time high of 303.6 pence. Similarly, Sainsbury's and Marks & Spencer recorded record levels at 311 pence and 295 pence, respectively. In this month's Christmas update, all these companies reported thriving business during the season.
As a result, these figures will put more pressure on the Bank of England. Like other central banks, the Bank of England has maintained a hawkish tone, pushing interest rates to their highest levels in decades. Consequently, I expect the bank to be more forceful this year in its interest rate decisions. This means keeping interest rates steady in the first half of the year and then starting to cut them in the second half.
Ultimately, expectations for a hawkish Bank of England explain the rebound of the GBP/USD pair in the past three months, jumping more than 5.45% from its November low. On the other hand, British stocks have come under pressure, with both the FTSE 100 and FTSE 250 indices erasing their gains since the beginning of the year. The GBP/USD and EUR/GBP pairs remained steady after the report.
GBPUSD Expectations and Analysis Today:
GBP/USD forecasts show that it is in a steadfast position and the bull’s control over the trend will strengthen if the currency pair moves above the resistance 1.2775. This level may motivate bulls to try to break through resistance 1.2830 again, which paves the way for the psychological peak 1.3000. According to the performance on the daily chart, the support level of 1.2600 will remain the most important for the strength and control of the bears and ending the current upward expectations. Today's economic calendar is devoid of important and influential releases, whether from Britain or the United States of America. Therefore, the impact on the currency pair will be from investor sentiment and the performance of global markets.
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