Market Analysis

The British Pound (GBP) outperformed its major counterparts on Friday, driven by unexpectedly strong Retail Sales data from the United Kingdom for September. Consumer spending, as reflected in the Retail Sales figures, increased by 0.3% month-on-month, defying economists' expectations of a 0.3% decline. Year-on-year, the measure surged by 3.9%, surpassing the forecasted 3.2% and improving on August's revised figure of 2.3%.

The Office for National Statistics (ONS) reported that non-food and department store sales were key contributors to the overall increase.

The positive Retail Sales data has tempered expectations that the Bank of England (BoE) will cut interest rates in its remaining two meetings this year. Market sentiment began shifting after September's Consumer Price Index (CPI) data revealed a larger-than-expected drop in inflation, now below the BoE’s 2% target.

Services sector inflation, a closely monitored metric by the BoE, slowed to 4.9%, marking the lowest level since May 2022. This decline in price pressures has bolstered confidence among traders that inflation is being brought under control.

Technical Analysis: Pound Sterling rebounds from 100-day EMA

The British Pound found strong buying momentum near the psychological support level of 1.3000 during Friday's London session. The GBP/USD pair strengthened after hovering near the 100-day Exponential Moving Average (EMA), situated around 1.2990.

The 14-day Relative Strength Index (RSI) swiftly returned to the 40-60 range after briefly dipping below it, indicating a resurgence of value-buying.

On the downside, a key support zone for GBP bulls can be found around 1.2920, close to the upward-sloping trendline drawn from the April 22 low of 1.2300. On the upside, the pair may face resistance near the 20-day EMA, around 1.3120.

Paraphrasing text from "FX Street" all rights reserved by the original author.