GBP/USD: dollar bid on Sep Fed rate hike expectations

GBP/USD in consolidating around the 1.3200 level and has been on the back foot ever since retail sales data.

June 2016 year on year data was up 4.3%, but fell by 0.9% month on month. We now await more data tomorrow with Markit July manufacturing and services PMIs, expected below the key 50 level. 

"Bullish USD narrative reappearing, not least because of the very constructive price action", explained analysts at Westpac, "Dollar Index closing above its 200d moving average for the first time in more than four months. 21% odds for a 21 Sep Fed hike are priced in, arguably too low and can trend to nearer 35-40%. The 26-27 July FOMC is likely to have a more upbeat message."

Key levels

In respect of tomorrow's data, Valeria Bednarik explained that, "worse-than-expected readings can send the pair down below the 1.3100 mark, to close the week near the 1.3000 figure." 

"Technically, the 4 hours chart shows that the price continues hovering around a horizontal 20 SMA, while the technical indicators remain stuck around their mid-lines, with no certain directional strength."