GBP/USD flat as retail sales eyed

• US unemployment claims fall below 200K
• UK retail sales expected to improve to -0.1%

The British pound is drifting on Thursday. In the North American session, GBP/USD is trading at 1.2142, almost unchanged.

The UK inflation report on Wednesday was a stark reminder that inflation remains stubborn and sticky. The Bank of England has raised the benchmark rate to 5.25%, but headline inflation was steady at 6.7% y/y and the core rate ticked lower to 6.1%, down from 6.2%. Both readings were higher than expected disappointed investors sent the British pound lower on Wednesday.

A key driver of headline inflation was rising motor fuel prices. The Israel-Hamas war has raised tensions throughout the Middle East and if there are disruptions in crude oil, inflation would likely rise due to higher motor fuel costs.

The UK wraps up the week with retail sales on Friday. The markets are braced for a weak September with a market estimate of -0.2%, following a 0.4% gain in August. On an annualized basis, retail sales declined by 1.4% in August, but are expected to improve to -0.1% in September.

In the US, unemployment claims for the week of October 14^th sizzled at 198,000. This was lower than the previous week’s release of 211,000 (revised) and lower than the consensus estimate of 212,000. The US labour market has been showing signs of softening as the Federal Reserve’s rate hikes continue to filter through the economy and dampen economic growth.

The markets are always interested in what Fed members have to say, hoping for some insights into Fed rate policy. A host of FOMC members will deliver remarks today, highlighted by a speech from Fed Chair Powell at an event in New York City.

Today’s lineup has added significance as the Fed will enter a blackout period ahead of the meeting on November 1st. The sharp rise in US Treasuries has led to some Fed members saying that inflation could fall without further hikes, and investors will be watching to see if that dovish message is repeated today by Powell and his colleagues.

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GBP/USD Technical

• There is resistance at 1.2163 and 1.2202
• 1.2066 and 1.1987 and providing support

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