UK Retail Sales Plunge
The British Pound has come under heavy selling pressure on Friday in response to the latest economic data out of the UK. Retail sales for August were seen falling to -1.6% from the prior month’s 0.4% reading. This was well below the -0.5% reading the market was looking for and marks the largest drop in retail activity this year. With inflation seen remaining near record highs in August, the drop in retail activity has fuelled heightened concerns over a forthcoming recession in the UK.
Traders now await the BOE next week, with the bank widely expected to lift rates by at least a further .5%. With inflation still around record highs and the BOE pressing ahead with tightening, the cost of living crisis in the UK is expected to continue to intensify over the remainder of the year, making the GBP outlook firmly skewed towards lower prices. GBPUSD is now trading at 37 year lows on the back of today’s UK retail sales data, reflecting the drop in sentiment towards GBP.
The sell off in GBPUSD this year has seen the market grinding steadily lower within a well defined bear channel. Price is now breaking lower once again, testing below the 1.1474 support. With both MACD and RSI bearish, while below here the focus is on a further push lower towards the 1.1064 level next and bear channel lows.