The Pound Sterling (GBP) managed to recover its initial losses and stabilized around 1.3460 against the US Dollar (USD) during Friday’s European trading session. This uptick follows the release of encouraging retail sales data from the United Kingdom for January, which has played a significant role in boosting investor confidence in the currency.
The Office for National Statistics (ONS) reported an unexpected increase in Retail Sales, revealing a month-on-month rise of 1.8% in January, up from 0.4% in December. Economists had predicted a modest growth of only 0.2%. Furthermore, year-on-year Retail Sales saw a significant surge of 4.5%, surpassing projections of 2.8% and inferring a robust recovery from the previous figure of 1.9%, which was revised down from 2.5%.
As the market digests this information, traders are bracing for additional fluctuations in the British currency, particularly with the flash S&P Global Purchasing Managers’ Index (PMI) data for February scheduled for release at 09:30 GMT. Expectations indicate that the UK’s Composite PMI will likely decline to 53.4, down from January’s reading of 53.7.
In contrast, the US Dollar is exhibiting strength ahead of the release of preliminary Gross Domestic Product (GDP) data and the S&P Global PMI for February, both set to be published at 13:30 GMT. At the time of reporting, the US Dollar Index (DXY), which measures the currency against six major rivals, is trading near its recently achieved four-week high of 98.00.
In terms of technical analysis, the GBP/USD exchange rate is holding steady at approximately 1.3460. The 20-day Exponential Moving Average, currently at 1.3575, is posing a downside threat, limiting potential rebounds and indicating a negative near-term bias. Sustained closes beneath this level suggest a weakening recovery trend. Immediate resistance for the pair is identified at the February 6 low of 1.3508.
The 14-day Relative Strength Index (RSI) is positioned at 41—indicative of bearish momentum and remaining below the midline, which confirms a lack of strong buying interest. As the price remains under the declining average, market sentiments appear skewed towards selling, with any rallies likely to struggle against dynamic resistances. A daily close above 1.3575 might alleviate some downside pressure and indicate stabilization; otherwise, the prevailing trend appears to lean towards further declines.
This situation continues to underscore the complexities facing the Pound Sterling, particularly in relation to the influence of key economic indicators and central bank policies. As investors keep a watchful eye on upcoming data releases, the currency’s trajectory remains uncertain, reflecting broader economic trends in the UK and beyond.
