GBP/USD fails to hold above 1.32 as Brexit uncertainty keeps GBP bulls in check
- Retail sales data from the UK beat the market estimates.
- DXY moves sideways below 94 even after US House passes tax legislation.
- Leaked documents raise concerns over Brexit trade deal.
Although the GBP/USD pair gained traction and rose above the 1.32 handle on the back of better-than-expected macroeconomic data from the United Kingdom, it failed to preserve its bullish momentum as investors remain reluctant to add to their long positions amid uncertainty surrounding the Brexit negotiations. At the moment, the pair is trading at 1.3185, up 0.1% on the day.
Eyes on tomorrow's meeting between May and Tusk
Following a 0.7% (revised from 0.8%) contraction in September, retail sales in the UK grew by 0.3% on a monthly basis in October. The initial reaction to the data fueled a short-winded upsurge but wasn't enough to help the pair make a decisive rise. In an article on Thursday, the Guardian claimed that a leaked internal discussion paper prepared by the European Commission showed that the EU was getting ready to offer a basic free trade deal to the UK, which was similar to that struck with Canada. In the meantime, in an exclusive interview with the newspaper Liverpool Echo, Bank of England Governor Mark Carney noted that Brexit could affect the path of the economy.
- UK retail sales beat expectations in October
- GBP: Guided by UK politics – Rabobank
On the other hand, the greenback's struggles continue, limiting the pair's losses for the time being. Even after the U.S. House of Representatives approved the tax bill with a 227-205 vote on Thursday, passing it to the U.S. Senate, the US Dollar Index failed to recover above the critical 94 mark. As of writing, the DXY was at 93.85, gaining 0.14%.
With a relatively quiet economic calendar on Friday, investors will be closely following the headlines coming from the bilateral meeting between the UK PM Theresa May and the president of the European Council, Donald Tusk, in Gothenburg, Sweden.
- GBP/USD rangebound expected between 1.30/1.32 – Scotiabank
Technical outlook
Despite a couple of failed attempts to advance further above the 1.32 handle, the pair is looking to close the second straight day above the critical 100-DMA, suggesting that buyers haven't lost control of the price action yet. On the upside, the pair could encounter the first technical resistance at 1.3235 (50-DMA) ahead of 1.3320 (Nov. 1 high) and 1.3400 (psychological level/Oct. 1 high).