GBP/USD Bullish Trend is Intact but Slowing Down

GBP/USD – prices, charts and analysis

• Retail sales improved in February, followed by UK PMIs.
• GBP/USD traders are watching the US banking sector for signs of stress.

Most read: BoE hikes rates 25 basis points, expecting inflation to cool, GBP moves higher

UK retail sales in February beat expectations on both a monthly and annual basis. According to the Office for National Statistics (ONS), retail sales rose 1.2% in February after rising 0.9% in January (revised upwards from 0.5%). According to the ONS, sales at non-food outlets rose $2.4 for the month, while sales at grocery stores rose 0.9%, “with some anecdotal evidence of lower spending at restaurants and takeaways due to cost of living pressures “.

The latest UK flash PMIs are due out shortly, with the range expected to be flat to slightly higher compared to last month.

For all market moving data releases and events go to DailyFX economic calendar

GBP/USD continues to trend higher, mainly due to US dollar weakness. While sterling is inherently neutral, the US dollar has moved lower in recent weeks on expectations that the Fed will hit the pause button on further rate hikes. The recent US banking turmoil and possible contagion effects are now being factored into the Fed’s deliberations and could deter Jerome Powell from tightening further.

GBP/USD has moved up around 450 pips over the past two weeks, with any pullbacks seen as buying opportunities. The pair broke above 1.2300 on Wednesday and Thursday but failed to close and open above this level to allow GBP/USD upward movement. Today’s session is quiet so far making a break above yesterday’s multi-week high 1.2344 unlikely. Initial support seen around 1.2200/1.2210.

GBP/USD daily chart – March 24, 2023

Chart via TradingView

Retailer data is mixed

Retailer data shows that 43.70% of traders are net long, with the short to long trader ratio at 1.29 to 1. The number of traders net-long is 5.07% higher than yesterday and 10.89% lower than last week, while the number of traders net-short is 0.52% higher than yesterday and 17.16 % higher than last week.

We typically view crowd sentiment as contrarian and the fact that traders are net short suggests GBP/USD prices could continue higher. Positioning is less net short than yesterday but more net short than last week. The combination of current sentiment and recent changes gives us another mixed GBP/USD trading bias.

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