The British pound loses momentum at the end of the week following the easing of tensions between Donald Trump and Fed Chair Jerome Powell (GBPUSD: -0.25%). The correction in the pound is deepened by worse-than-expected UK retail sales data, which overshadowed the UK–India trade deal signed earlier today.
The GBPUSD pair halted its decline at key support around 1.3461, but remained below the 78.6% Fibonacci retracement level. Source: xStation5
Key GBP drivers today:
- The US dollar is strengthening against most currencies today after President Trump’s visit to the Fed’s renovation site.
- According to Trump, the meeting was “without tensions.” He stated he “only wants one thing: interest rates have to come down,” expressing faith that Powell would “do the right thing.” Asked about firing Powell, Trump responded: “It’s a big move, and I don’t think it’s necessary.” The meeting calmed markets and reinforced expectations for a cautious Fed policy stance.
- UK retail sales rebounded in July by 0.9% m/m after May’s sharp drop of -2.9%. Retailers cited hot weather and favorable conditions boosting supermarket sales. Fuel sales rose the most (+2.8% m/m), and beverages and clothing were also in demand. However, the data missed expectations, generating a bearish signal for GBPUSD.
- Consumer sentiment also weighed on the pound, with the confidence index falling to -19 (previous -18, forecast -20). Savings are increasing amid concerns over potential autumn tax hikes and sticky inflation.
- The UK and India signed a landmark trade deal, boosting exports of cars, whisky, textiles, and jewellery, expected to create over 2,200 UK jobs. The deal also includes cooperation on migration and is regarded as the UK’s most significant trade pact since Brexit.
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