The British pound has pushed above the 1.19 line on Friday. GBP/USD is currently trading at 1.1924, up 0.49%.
Retail sales bounce back
Retail sales showed some life in October, posting a gain of 0.6% MoM. This was a strong rebound from the -1.5% reading in September and above the consensus of 0.0%. The gain is welcome news and has provided the pound with a boost today. Still, consumer spending has a long road to recovery, as retail sales came in at -6.1% YoY. This beat the September figure of -6.8% and the forecast of -6.5%, but the struggling UK economy will need a sharp turnaround in consumer spending, a key driver of economic growth. Consumer confidence remains in deep-freeze but improved slightly in October to -44, up from -49 in September.
With the UK economy in a recession, the government’s bleak Autumn Statement was no surprise. Finance Minister Hunt announced a mix of tax hikes and spending cuts. There wasn’t much for Britons to cheer about in the austerity budget, but perhaps there is a sense of relief that it is a step in the direction to restore fiscal responsibility, after the shenanigans of Liz Truss and her mini-budget caused a financial crisis.
The BoE is projecting that unemployment will rise to 6.5% and the country will experience negative growth in the second half of this year, throughout 2023 and into the first half of 2024. GDP declined by 0.2% in the third quarter, and the headwinds look formidable for the UK economy and the British pound.
The Federal Reserve has kept up its hawkish talk in an effort to dampen investor exuberance after the last inflation report fueled speculation that the Fed planned a pivot in policy. Fed member Bullard weighed in this week, urging the Fed to raise rates to at least 5%-5.25%. Bullard went even further, presenting a scenario in which the funds rate would climb as high as 7%. The message helped dampen risk appetite, sending equity markets lower and the US dollar higher.
GBP/USD Technical
- There is resistance at 1.1961 and 1.2030
- GBP/USD has broken below support at 1.1896 and 1.1786. Below, there is support at 1.1660
