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GBPUSD Near Month-to-Date Lows As Dollar Appetite Rises

GBPUSD lost more ground on Friday after the BoE maintained interest rates at 5.25%-5.50% with a dovish undertone. The pair traded at 1.2628 after declining by 0.23% at press time. Furthermore, it is now hovering slightly above month-to-date lows after ten days of steep decline. Meanwhile, the US dollar also benefits from safe haven buying as the Eurozone inflation rates continue to come down.

The Bank of England Monetary Policy Committee members voted to maintain high interest rates, meeting the wider market expectations. Furthermore, Governor Andrew Bailey stated that rate cuts would likely come down the line on evidence of lower inflationary pressures. This stance did little to support the pound after the Federal Reserve also retained high interest rates.

GBPUSD got support on Friday after the UK retail sales data showed stronger consumer spending in February. Core Retail sales (excluding vehicle and fuel sales) beat the forecast decline of -0.1% to grow by 0.2%.  The overall retail sales reading came in at 0.0%, higher than the expected contraction of -0.4%. However, the pound also has a downside from Wednesday’s CPI data, which showed a slowdown in inflation in February to 3.4%, lower than the forecast 3.5%. This raises the prospect of rate cuts and may inform dovish BoE policy.

Meanwhile, the US dollar has tailwinds from Initial Jobless Claims, which came in at 210,000, lower than the expected 210,000. Also, Existing Home Sales stood at 4.38 million, beating the forecast 3.95 million. In addition, the preliminary S&P Global US Manufacturing PMI figure read 52.5, higher than the forecast 51.8. The absence of high-impact data from the US and the UK on Friday will likely keep GDPUSD on the descent heading into the weekend.

Technical analysis

GBPUSD is bearish as evidenced by the RSI indicator. The downtrend is likely to continue if the price action remains below the 1.2680 pivot. The momentum could support a move below 1.2610 and possibly to 1.2580 in extension. However, a move above the pivot will build momentum to move to 1.2710. A continuation of control by the buyers at that point will breach the resistance at 1.2710, invalidate the downside narrative and potentially test 1.2740.