GBP/USD edges lower after soft retail sales report

The British pound has slightly lower on Friday. GBP/USD is trading at 1.2922 in the North American session, down 0.17% on the day. The pound has sparkled in the month of July but has hit a snag, dropping 0.50% on Thursday and extending those losses today.

UK retail sales slide due to bad weather

UK retail sales suffered a turnaround in June, falling 1.2% m/m after a strong gain of 2.9% in May and below the market estimate of -0.4%. Annually, retail sales fell 0.2%; following a revised 1.7% gain in May and shy of the market estimate of a 0.2% rise.

Fingers were pointing again at inclement weather, which kept shoppers away from the stores. A wet April was blamed for a weak retail sales report and the unseasonably cool weather in June, along with uncertainty prior to the July 4th election were blamed for a decrease in June retail sales.

Consumers are showing a reluctance to spend, despite inflation falling to 2% and an increase in wages. Consumers have been squeezed by inflationary pressures and high interest rates and confidence in the economy has been weak. Still, the GfK consumer confidence index, released on Friday, ticked up to -13 for July, up a notch from -13 in June and its highest level since September 2021.

In the US, the Fed is signaling that the central bank is moving closer to a historic rate cut. Earlier in the week, FOMC members Chris Waller and John Williams hinted at a rate cut in the coming months, although neither provided a specific date. Waller said that the higher-than-expected inflation in the first quarter of 2024 may have been an “aberration” and inflation was moving lower towards the 2% target. The markets have priced in a September cut at 90%, up from just 70% several weeks ago.
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GBP/USD Technical

•   GBP/USD is testing support at 1.2915, followed by support at 1.2887
•  1.2969 and 1.2997  are the next resistance lines

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