GBP/USD looks to regain 1.2100 on broad-based US Dollar weakness, mixed UK shopping data

• GBP/USD picks up bids to extend Friday’s recovery.
• UK shoppers’ footfalls jumped 50% on last year but stayed well below pre-pandemic levels.
• Mixed US data, risk-on mood enables Cable buyers to keep the reins.

GBP/USD prints mild gains around 1.2085 as the Cable bulls cheer mixed UK statistics, as well as the broad based US Dollar weakness during Tuesday’s sluggish Asian session.

Recently, the Financial Times (FT) conveyed the British shopping figures from retail intelligence provider Springboard that shows a 50% jump in footfall versus December 26 last year. However, the news mentioned that the foot traffic on the high street was down 25.3% compared with pre-pandemic in 2019, while for shopping centres it was down 36.9%.

On the other hand, the Core US Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s favorite inflation gauge, matched 4.7% YoY forecasts for November versus 5.0% prior. Further, the Durable Goods Orders for the said month marked a contraction of 2.1% compared to -0.6% expected and 0.7% previous readings. More importantly, the Nondefense Capital Goods Orders ex Aircraft marked improvement of 0.2% compared to 0.0% expected and 0.3% revised down prior. Additionally, the Federal Reserve (Fed) Bank of Atlanta’s GDPNow tracker rose to show +3.7% annualized growth for the fourth quarter (Q4) versus +2.7% previous estimates.

It should be noted that the China scrapped the COVID quarantine rule for inbound travellers, starting from January 08, which in turn triggered the market’s risk-on mood. The news joined geopolitical fears emanating from Russia and North Korea to portray cautious optimism in the market. As a result, S&P 500 Futures rise 0.60% intraday to 3,892 whereas the US 10-year Treasury yields remain sluggish at around 3.74% by the press time. That said, the US Dollar Index (DXY) prints three-day downtrend near 104.10 at the latest.

On a broader front the UK’s recent headlines numbers haven’t also been helpful for the Bank of England (BOE) to remain hawkish and hence the bullish bias over the GBP/USD pair remains limited.

Even so, the holiday season and a lack of major data/events could join the recently upbeat sentiment to favor GBP/USD bulls.

Technical analysis

A clear upside break of the two-week-old descending trend line, around 1.2055 by the press time, keeps GBP/USD buyers directed towards the the convergence of a downward-sloping resistance line from December 20, as well as the 100-HMA, close to 1.2100.