English
Despite strong UK Retail Sales, GBP/USD confronts resistance above 1.2200
As investors' risk appetite has diminished, the GBP/USD has suffered selling pressure while aiming to surpass 1.2200. The USD Index is projected to remain flat prior to Fed Chair Powell's address. Compared to the previous year, annual Like-for-Like Retail Sales in the United Kingdom have increased by 6.5%.
The GBP/USD pair is sensing pressure while bridging the slight gap in overcoming the round-level barrier of 1.2200 in the early Asian session. As demand for US government bonds declines, strong market mood weighs on the Cable's ability to sustain its recent climb. Given the selling pressure on the British pound, it is quite probable that the Cable will continue to decline.
In the meantime, S&P500 futures have extended their losses following Monday's late sell-off, indicating a more risk-averse market mentality. It seems that the risk appetite of the market players has been cut ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. The US Dollar Index (DXY) is likely to stay on tenterhooks as the speech from Fed Powell will provide indications about the likely monetary policy for the February meeting.
After a dramatic contraction in Manufacturing and Services PMI in the United States economy as well as a significant reduction in pay inflation, the US Dollar Index experienced extreme volatility in a few trading sessions. However, the Fed's policymakers see little change in their predictions for future interest rates.
Mary Daly, president of the San Francisco Fed Bank, stated that the salary figures for December just represented one month of data, which cannot be considered a triumph. It is premature to declare success and halt rate increases. To manage stubborn inflation, it is fair for interest rates to be at 5%-5.25%. Also, according to Atlanta Federal Reserve bank president Raphael Bostic, interest rates will peak between 5% to 5.25 percent, and the central bank will continue to maintain higher rates through CY2023.
According to Reuters, Bank of England (BoE) Chief Economist Huw Pill stated that supply-chain interruptions appear to have diminished in recent months. He warned that imported gas costs have stayed much higher than in the past, then the prospect of a second round may possibly persist.
The release of optimistic Like-for-Like Retail Sales (Dec) data by the British Retail Consortium (BRC) has failed to give support for the British pound. The economic statistics has surged to 6.5% vs. the earlier release of 4.1% on an annual basis.
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