GBP/USD eyes UK retail sales – heochaua

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<li>UK retail sales expected to dip by 0.5% on Friday</li>
</ul>
<p>The British pound has edged lower on Thursday. In the European session, GBP/USD is trading at 1.2655, down 0.20%.</p>
<p><strong>Markets brace for retail sales downswing</strong></p>
<p>What goes up must come down. That has the markets fretting ahead of the UK retail sales report on Friday. Retail sales growth was brisk in November, with an impressive gain of 1.3% m/m. This followed zero growth in October and marked the strongest gain since April 2022.</p>
<p>The problem with the strong November release was that consumers were enticed to spend big due to Black Friday sales in late November. This is expected to dampen December retail sales, with many shoppers taking advantage of the discounted prices and attending to their Christmas shopping a few weeks early. The market estimate for December retail sales stands at -0.5%.</p>
<p>The Bank of England will be keeping a close look at the retail sales report, as it digests this week’s inflation data with an eye to the next policy meeting on February 1. Inflation in December rose unexpectedly, climbing from 3.9% to 4.0%.</p>
<p>The BoE has tried to dampen market expectations of up to six rate cuts this year, with Governor Bailey sticking to a script of “higher for longer”. The BoE won’t be entertaining rate cuts until it is convinced that inflation is closer to the 2% target and key economic releases point to an improving economy. The unexpected rise in inflation did not support talk of a rate cut, and all eyes are now on Friday’s retail sales report.</p>
<p>.</p>
<p><strong>GBP/USD Technical</strong></p>
<ul>
<li>GBP/USD tested support at 1.2656 earlier. Next, there is support at 1.2616</li>
<li>There is resistance at 1.2715 and 1.2755</li>
</ul>
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