The GBP/USD pair remained under pressure during Tuesday’s Asian session, trading just below the mid-1.2600s, though it lacked significant follow-through selling. The British Pound (GBP) was weighed down by disappointing retail sales data and a modest uptick in the US Dollar (USD).
The British Retail Consortium (BRC) reported a 3.3% decline in sales volumes over the 12 months to November, marking the weakest performance since April. This drop was partly due to the timing of Black Friday sales, but the overall decline points to weakening consumer confidence, which continues to undermine the GBP. The lackluster retail performance, combined with a strengthening USD, is creating headwinds for the GBP/USD pair.
The USD Index (DXY), which measures the Greenback’s performance against a basket of currencies, has been rising after a bounce from a near three-week low. The move is supported by market expectations that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. There are also growing concerns about potential global trade wars triggered by US President-elect Donald Trump’s tariff proposals, alongside fears that his expansionary policies could spur inflation and limit the Fed’s ability to ease rates.
In addition, persistent geopolitical tensions, particularly related to the Russia-Ukraine war, have bolstered the safe-haven USD, further weighing on the GBP/USD pair. However, the downside for the pair has been limited by the reduced likelihood of a Bank of England (BoE) rate cut this year, following data showing a pickup in underlying price growth in the UK during October.
Market participants are also cautious, waiting for significant upcoming US economic data, including the highly anticipated Nonfarm Payrolls (NFP) report. Traders are also looking to Fed Chair Jerome Powell’s speech for insight into the Fed’s future rate-cut trajectory. Meanwhile, the release of JOLTs Job Openings data on Tuesday may provide short-term volatility for the GBP/USD pair.
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