GBP/USD Daily Forecast – UK Retail Sales Slumps, BoE Up Next

UK Retail Sales Decline 0.6% in November

The Office for National Statistics reported a month over month decline of 0.6% in retail sales for the UK. The figure fell short of the analyst estimate for a rise of 0.3% and reflected the largest drop since December 2018.

GBP/USD has not shown much of a reaction to the data as investors brace for the latest rate decision from the Bank of England. At the last meeting, two policymakers surprised the markets by voting for a rate cut. Analysts are expecting the vote to remain the same this around and for the interest rate to remain unchanged.

Policymakers will get a chance to express their views following the UK election. Sterling was boosted initially by the election but has come under pressure this week after Boris Johnson once again brought up fears of a no-deal scenario. Johnson announced earlier in the week that he intends not to allow any further delays and will implement a law to ensure it, even if it means leaving without a deal.

Technical Analysis

The technical outlook for GBP/USD is signaling more downside at the moment, but that could change quickly depending on the outcome of the BoE meeting.

The main development this week was a fall below support. This support is derived from a horizontal level at 1.3145 that has been well-respected on a weekly chart. Further, the pair has fallen below the lower bound of a rising trend channel. This channel had encompassed price action in the recovery that’s been taking place since September.

If the pair fails to rally above the broken support area, the most likely scenario would be for a further decline to test support at the psychological 1.30 handle. This is an area that was major resistance from around the middle of October until the pair finally broke higher in early December.

Bottom Line

• GBP/USD traders await the outcome of today’s BoE meeting.
• The pair is currently near a major inflection point that falls at 1.3145. If the pair fails to recover above it, a test of 1.3000 might be in the cards.