GBP/USD Fundamental Backdrop
Cable has started the day on the back foot against the greenback surrendering the key confluence area around 1.1500. This sour start to the day comes on the back of a reported slowdown in sales in the UK as consumers prioritize essential purchases. The figures came courtesy of a report by the British Retail Consortium with the group noting a shift in spending behavior as the busy holiday season approaches.
Cable enjoyed gains of around 3% against the greenback over the previous two sessions yet the slowdown in sales provides further indication of the challenges ahead. Cable is being helped by a weaker dollar to start the week as the greenback struggles to hold on to early session gains.
Bank of England Chief Economist Huw Pill commented that the central bank has been trying to give a more realistic view as to where rates are heading while warning that more rate hikes are needed. Pill stated that risks in the UK are tilted towards higher inflation moving forward while confirming that rate hikes will be driven by the economic outlook.
US Dollar Index, Daily Chart- November 8, 2022
Markets have seen a slight increase in risk appetite since Friday as rumors continue to swirl around a potential re-opening in China. This in part could be the reason for the greenbacks slump. There remains little in the form of major economic releases from the UK this week with the main risk event the US Inflation numbers due out on Thursday.
Given the lack of data there is a real possibility cable could benefit from broad-based dollar weakness heading into Thursday’s CPI release. This could see GBP/USD reclaim the 1.1500 area and make a run for September highs resting at the 1.1750 area.
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GBP/USD Daily Char
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