GBP/USD Declines as US Jobless Claims – Capital Street FX
The Pound Sterling weakens following strong U.S. retail sales data and a drop in jobless claims
FUNDAMENTAL OVERVIEW:
- The Pound Sterling hovers around 1.3000 against the US Dollar as slowing UK inflation heightens expectations of a more dovish Bank of England.
- UK service inflation dropped to 4.9%, its lowest since May 2022. Meanwhile, rising speculation of a Trump victory in the U.S. presidential election has boosted the U.S. dollar.
The Pound Sterling (GBP) is struggling to climb back above the key 1.3000 level against the US Dollar during Thursday’s New York session. The GBP/USD pair has given up some of its intraday gains as the US Dollar strengthens following the release of positive economic data. The upbeat monthly Retail Sales for September and better-than-expected Initial Jobless Claims for the week ending October 11 supported the dollar’s rise.
US Retail Sales, a crucial indicator of consumer spending, increased by 0.4%, surpassing both the forecast of 0.3% and August’s 0.1% growth. The report highlighted strong sales at retail and food outlets, as well as solid demand for clothing, though furniture stores saw weaker foot traffic. Initial Jobless Claims fell to 241,000, beating both the expected and previous figure of 260,000.
The outlook for the US Dollar remains positive, as traders have dismissed expectations of significant rate cuts by the Federal Reserve (Fed) in November. Market participants anticipate that the Fed will refrain from aggressive rate cuts, given the recent September labor market data, which indicates that the US job market remains robust.
At the same time, growing anticipation of former US President Donald Trump winning the upcoming US presidential election on November 5 has bolstered the US Dollar. Investors are forecasting that a Trump administration would lead to looser financial conditions, higher import tariffs, and tax reductions.
On the economic front, the next key data release for the UK is the Retail Sales report for September, set to be published on Friday.
GBP/USD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
GBP/USD is currently trading within a down channel.
GBP/USD is positioned below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in Selling zone, while the Stochastic oscillator suggests Neutral trend.
Immediate Resistance level: 1.3030
Immediate support level: 1.2979
HOW TO TRADE GBP/USD
After a sharp rise, GBP/USD encountered resistance and reversed to the downside. It is now trading near a critical level, hovering around the last key support before potentially extending its decline. If GBP/USD breaks through this support zone, further downside movement is likely.