GBP/USD Remains Subdued by MAs After BOE Bailey’s 4 Rate Cuts Comment
After falling nearly 10 cents in the last 2 months, GBP surged 1.5 cents higher last week, but was rejected by MAs, as the UK economy weakens further, as indicated by this week’s data.
The GBP/USD exchange rate has experienced a significant decline of nearly cents over the past two months, briefly falling below the 1.25 level. However, last week saw a notable rebound, with the pair rising by 2.5 cents to reach 1.2749. Despite this recovery, risk sentiment soured yesterday, and buyers were unable to maintain the price above the 200-day simple moving average (SMA), leading to a pullback to around 1.26.
Despite the recovery from a six-month low of 1.2486 where this pair fell two weeks ago, the GBP/USD pair continues to face downward pressure. The pair failed to sustain its gains above the 1.2700 level, even after reaching a higher high of 1.2749 on November 29. This suggests that upward momentum is limited, and the pair remains vulnerable to further declines.
GBP/USD Chart Daily – MAs Continue to Provide Resistance
A key factor weighing on the pound is the latest retail sales data from the British Retail Consortium (BRC). Retail sales in November fell by 3.4%, significantly missing expectations of a 0.7% increase. This marks the weakest performance since April. Across all retail categories, sales declined, with shopping centers hit hardest due to a dramatic reduction in foot traffic.
In summary, while the GBP/USD pair has shown some signs of recovery, it remains under pressure from weaker-than-expected economic data and risk sentiment. The outlook for the pair will depend on upcoming economic releases and broader market conditions.
Final Services PMI Report for November
- Final Services PMI 50.8 vs. 50.0 expected and 52.0 prior.
- Final Composite PMI 50.5 vs. 49.9 expected and 51.8 prior.
Key findings:
- Marginal overall rise in business activity in November
- Staffing numbers decrease for second month running
- Weakest output growth projections for nearly two years
Comment:
Tim Moore, Economics Director at S&P Global Market Intelligence, highlighted the challenges faced by the UK service sector in November. Business activity growth slowed to its weakest pace in over a year, nearing stagnation. According to Moore, factors such as weaker sales pipelines, reduced new projects, and heightened client caution were significant contributors to the decline in output.
Employment was also affected, with total workforce numbers shrinking for a second consecutive month. Survey respondents attributed this to the pressure of rising payroll costs, particularly upcoming increases in employers’ National Insurance contributions, leading to a reluctance to replace departing staff. Additionally, softer growth in new business further dampened recruitment efforts.
Comments form Bank of England Governor Bailey
- Expects four rate cuts next year if economic outlook stays the course
- Inflation had fallen more rapidly than what was expected a year ago
- There are a number of potential paths ahead
- But the base case scenario implied is that BOE would stick with more “gradual” rate cuts
- This central view means BOE would have to “lean in a bit harder” to keep disinflation process on track
- Full transcript
GBP/USD Live Chart
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