The British Pound is experiencing significant pressure from the ‘King Dollar’ on Friday, declining by 0.52% despite a lack of economic data from the US, with only Federal Reserve officials making headlines. The recent data, while encouraging, did not provide sufficient support for Sterling in the Retail Sales sector. The current trading value of GBP/USD stands at 1.3482.
GBP/USD is currently positioned under 1.3480, while the US Dollar maintains stability around 97.60 following the Federal Reserve’s 25 basis points rate cut. UK Retail Sales exceeded forecasts at 0.5% MoM; however, concerns regarding fiscal stability limit Sterling’s potential gains against the Greenback. Quad witching introduces volatility risks, as traders focus on upcoming US data and Federal Reserve speakers next week.
> Sterling declines even with positive UK Retail Sales, weighed down by a general recovery of the Dollar and ongoing fiscal worries : The current market sentiment is characterized by a blend of optimism and caution, particularly as we approach the quad witching event this Friday, which has the potential to induce fluctuations in US equity markets. The US Dollar has rebounded following a decline to three-year lows in the wake of the Fed’s monetary policy decision on Wednesday. Minnesota Fed President Neel Kashkari expressed his support for the rate cut this week, citing concerns that the risks of rising unemployment necessitated a proactive response. He observed that it is challenging to envision inflation exceeding 3% due to tariffs and added that if the labor market strengthens and inflation increases, the Fed ought to maintain interest rates. He stated that he is receptive to increasing rates should economic conditions justify such a move. In the meantime, the decision by the Fed on Wednesday to reduce rates by 25 basis points was entirely anticipated by market participants. As a result, the Dollar Index, which measures the dollar’s value against a basket of six currencies, experienced a significant rally and stabilized for the week at approximately 97.62. In the UK, Retail Sales experienced a 0.5% month-over-month increase in August, surpassing the anticipated 0.4%. Additionally, the sales growth for July was subject to a minor downward revision. Despite this, Cable did not manage to surpass the US Dollar as worries about Britain’s financial situation intensified. Next week, the US economic calendar will include S&P Global Flash PMIs, Durable Goods, Jobless Claims, GDP data, and the release of the Fed’s preferred inflation measure, the Core PCE. In addition, a series of Federal Reserve officials will engage with the media. In the UK, attention is focused on the upcoming Flash PMIs and statements from Bank of England policymakers.
GBP/USD transitioned from an upward bias to a negative stance over the week. Ultimately, the ‘evening star’ pushed the exchange rate beneath 1.3500, heightening the likelihood of approaching the convergence of the 100 and 50-day SMAs near 1.3477/63. A daily close beneath the latter paves the way to evaluate the September 3 low of 1.3332. On the other hand, a daily close of GBP/USD above 1.3600 may strengthen the argument for another effort to test the yearly high at 1.3788.