MAs Keep GBPUSD Subdued As UK Shop Prices

GBPUSD was on a strong bullish trend during most of August, gaining 6 cents, but the trend may have reversed as the charts show. The USD found some support last week, which sent this pair 1.5 cents lower, while yesterday’s retrace higher was pretty weak, with the 50 SMA acting as resistance throughout the day.

Some of the weakness in the British pound last week stemmed from concerns on the GBP side. UK Prime Minister Keir Starmer issued a caution about the upcoming budget in October, stating that he will need to ask the public to endure short-term pain for long-term gains. This suggests the government might introduce measures such as wealth redistribution or higher taxes on higher-income individuals to address fiscal challenges. This stance seems unusual given the increased tax revenue as prices have risen.

GBP/USD Chart H4 – MAs Have Turned From Support Into Resistance

GBP/USD has ended its three-day losing streak, trading around 1.3140s yesterday. The US Dollar (USD) was facing some slight pressure due to increased market optimism and rising dovish expectations from the US Federal Reserve (Fed). On the GBP side, the Bank of England (BoE) is anticipated to gradually lower interest rates over the remainder of the year, which could support the British pound (GBP). However, Governor Andrew Bailey also advised against rushing to reduce interest rates further. This sentiment was echoed at the Jackson Hole symposium, suggesting a cautious approach by the BoE.

British Retail Consortium (BRC) Retail Sales Monitor for August

• Total sales in August +1.0% y/y vs +0.5% in July
• BRC Like-for-like sales +0.8% y/y vs +0.3% in July

• The top UK economist at Barclays has stated that a recent study supports the view that consumers will play an increasingly significant role in driving the economy, which had previously depended on government spending for growth. With real wages on the rise and consumer confidence improving, the combination of these factors, along with falling interest rates, is expected to empower individuals to boost their spending, thereby stimulating economic activity.

GBP/USD Live Chart