Sterling struggles amid soft consumer demand
The British Pound (GBP) faced mild selling pressure in early European trading on Friday after UK retail sales data showed an unexpected decline in November. While markets had anticipated a 0.4% increase, the actual figure came in at -0.1%. However, the pace of decline was slower than October’s -0.9%, which had been revised down from -1.1%.
According to the UK’s Office for National Statistics (ONS), annual retail sales rose by just 0.6%, below the 0.9% forecast. The drop was driven by lower fuel demand and weaker sales in non-retail stores. However, demand for household goods, clothing, and footwear remained resilient.
Persistent weakness in retail data raises concerns about the health of the UK economy, especially amid a soft labor market and ongoing external risks.
On Thursday, the Bank of England (BoE) cut interest rates by 25 basis points to 3.75%, with a narrow 5–4 vote. Although the initial reaction boosted the Pound, the rally was short-lived as the BoE reiterated its gradual easing stance and projected inflation to approach 2% by Q2 2026.
On Friday, GBP/USD traded near 1.3370, pressured by weak UK retail data and a stronger US Dollar. The Dollar Index (DXY) rose 0.17% to 98.60, as traders remained skeptical that the Federal Reserve would cut rates in January, despite softer inflation data in the United States.
US CPI data showed headline and core inflation at 2.7% and 2.6%, respectively. Although the initial market reaction was negative, the Dollar quickly recovered, with analysts citing potential distortions from the government shutdown.
According to the CME FedWatch tool, the probability of a rate cut by the Federal Reserve in January rose to 25.5%. Meanwhile, markets await the White House’s announcement of Jerome Powell’s successor. Leading candidates include Kevin Hassett, Kevin Warsh, Christopher Waller, and Michelle Bowman.
GBP/USD is trading near 1.3377, with the 20-day Exponential Moving Average (EMA) steadily rising and price holding above it — preserving the bullish structure. A pullback to the EMA at 1.3320 could attract buyers.
The Relative Strength Index (RSI) stands at 59, indicating neutral-to-bullish momentum. The upward EMA slope confirms higher lows, and recent dips have remained shallow. A breakout above the two-month resistance at 1.3455 could open the path to new highs. However, a daily close below the EMA may trigger deeper correction toward the December 3 low at 1.3203.
The British Pound remains under pressure from weak retail data and cautious monetary policy. While the technical structure is still bullish, traders should closely monitor price reactions at key support and resistance levels. Additionally, developments surrounding the next Federal Reserve Chair could be a major driver of future FX volatility.