fell slightly on Tuesday after a positive Monday, falling to 1.3486. The market continues to evaluate the economic data published at the end of last week. The US dollar has so far been supported by persistent uncertainty in the Middle East, encouraging investor caution and supporting demand for safe-haven assets.
Data for April showed UK retail sales fell 1.3% month-on-month, the sharpest drop in almost a year and notably worse than market forecasts.
Consumers are cutting back on spending amid high fuel prices, rising energy bills and concerns over the Middle East conflict.
Earlier labor market data also indicated a weakening outlook. Unemployment continues to rise, while real wage growth remains weak amid accelerating inflation.
Additional pressure on British assets comes from deteriorating public finances. The UK's budget deficit in April was the highest since the COVID-19 pandemic, with borrowing rising to £24.3 billion, the second highest figure on record in April.
Despite this, the pound has partially recovered from the political pressures of recent weeks. The market remains attentive to the situation surrounding Prime Minister Keir Starmer following the Labor Party's weak results in the local elections.
Technical analysis
On the H4 chart, the GBP/USD pair has reached the level of 1.3500 and is trading within a wide consolidation range above 1.3434. A move lower towards 1.3393 is likely in the near term. After this, the pair may consolidate, with potential for a move towards 1.3455 to the upside or a drop towards 1.3290 to the downside. The MACD indicator supports this scenario, with its signal line above zero and pointing firmly downwards, indicating weakening bullish momentum.
On the H1 chart, GBP/USD is trading within a compact consolidation range around 1.3494, which currently extends to 1.3500. A move lower towards 1.3393 is likely. The stochastic oscillator confirms this scenario, with its signal line below 50 and pointing firmly towards 20.
Conclusion
GBP/USD remains under pressure amid weak domestic data, deteriorating public finances and political uncertainty, which continue to weigh on the pound. UK retail sales recorded their biggest drop in almost a year, while the budget deficit rose to its highest post-pandemic level.
Labor market conditions are also weakening, with unemployment rising and wage growth weak despite inflation accelerating. Although the Middle East conflict continues to support safe-haven demand for the dollar, sterling has shown some resilience in recovering from recent political pressures.
However, technical indicators point to a further short-term decline towards 1.3393 and potentially 1.3290. The pound's path will likely depend on whether domestic economic concerns intensify or whether geopolitical developments change the broader risk environment.
By RoboForex Analysis Department
Disclaimer:
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
