Forex world

December 16, 2022

GBP/USD licks BOE-inspired wounds near 1.2200

- GBP/USD prints mild gains around weekly low to pare the biggest daily loss in 1.5 months.

- US Dollar fades recovery moves on mixed data, market’s consolidation.

- UK Retail Sales for November, US/British PMIs for December will be important for fresh impulse.

GBP/USD regains 1.2200 as it consolidates the recent losses amid a sluggish Friday morning in Europe. In doing so, the Cable pair portrays the trader’s positioning before the key UK/US data after bears cheered the Bank of England’s (BOE) dovish rate hike with the biggest daily slump in six weeks.

That said, the US Dollar’s failure to defend the previous day’s rebound from a six-month low, mainly due to mixed data and a lack of a major catalyst also favors the GBP/USD pair buyers. It’s worth noting that the US Retail Sales flashed -0.6% MoM figure in November versus 0.1% expected and 1.3% prior. Further, manufacturing survey details from Philadelphia Fed and New York Fed came in disappointing for the said month whereas Industrial Production eased in November and the Jobless Claims also dropped for the week ended on December 09.

It’s worth noting that the market sentiment remains dicey as recession woes underpin the Treasury bond yields but the US stock futures and equities in the Asia-Pacific region remain lackluster ahead of the final shot of the volatile week. The reason for the lack of negative performances of equities could be linked to the hopes for more stimulus from China.

Even so, the Bank of England’s (BOE) hidden signals for the GBP/USD pair bears and looming economic fears surrounding the UK, mainly due to the extreme weather conditions, workers’ strikes and a new government, suggest the quote further downside.

Other than the BOE-led slump, the US Dollar’s recovery, mainly due to the rush for risk safety, also underpinned the GBP/USD pair’s fall the previous day. The market’s risk aversion could be linked to the major central banks’ readiness for keeping the higher rates for longer, as well as the fresh Sino-American tussles.

Looking forward, UK Retail Sales will be important for the GBP/USD pair traders as an immediate catalyst while the British/US PMIs may direct the pair moves afterward. That said, the UK Retail Sales may improve to -5.6% YoY versus -6.1% prior while the Retail Sales ex-Fuel could arrive at -5.8% YoY from -6.7% previous readings. Further, the UK’s S&P Global/CIPS Manufacturing PMI could ease to 46.3 from 46.5 prior while the more important Services PMI may also drop to 48.5 from 48.8 prior. As a result, the Composite PMI could also decline to 48.0 from 48.2 previous readings.

On the other hand, the market forecasts surrounding the US S&P Global PMIs appear mixed as Services activities are likely to improve but not the manufacturing ones. Even so, both these sectors are expected to print the below 50 figure that suggests a contraction in activities and could weigh on the US Dollar in case of a downbeat outcome.

Technical analysis

Despite the latest corrective pullback, GBP/USD remains on the bear’s radar unless it defies the previous day’s rising wedge breakdown by crossing the support-turned-resistance near 1.2355.

Meanwhile, the theoretical target of rising wedge confirmation directs the British Pound bears toward October’s low near 1.0925. However, the 200-DMA and 50-DMA, respectively around 1.2100 and 1.1730, could offer intermediate halts during the expected south run.


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