GBP/USD: UK economy in position to aid sterling with its own economic performance

Cable’s attempts at upper limit on Wednesday and Thursday failed with a weekly close below 1.31 but the pair is still in the game as July and August UK statistics were generally upbeat led by retail sales, FXStreet’s analyst Joseph Trevisani briefs. GBP/USD has recovered the 1.31 mark on Monday, up 0.2% on the day as of writing.

Key quotes

“Statistics in the UK continued to improve. Retail sales for July rose 3.6%, almost double the 2% forecast. Consumer prices in July climbed 0.4%, reversing the expected 0.1% decline and with the year 1% higher from 0.6% in June, demand is clearly returning to the sector.”

“The sterling pull-back on Friday was due to two factors. Primary was the profit motive for a market long pounds and given an excuse for taking by better than expected US data and a long summer weekend. Second and of less import now but with more meaning in the weeks ahead is the waning momentum of the dollar decline and its questionable basis in a Covid-19 weakened US recovery.”

“Recent US economic information has been good except for the variable Initial Jobless Claims and much interpretation will ride on the August Nonfarm payrolls in two weeks. Until then, a weak dollar will continue to be the market assumption with ever waning conviction.”

“Support to 1.3000 is strong but beneath down to 1.2750 is much more fragile. The rapid rise through that range in the last ten days of July and the even more precipitous fall in early March left few notable trading limits.”