Chart of the day: GBPUSD (17.11.2023)

Today at 07:00 am GMT we received the latest UK retail sales report. The data came in well below expectations, on a year-on-year basis we saw an acceleration of the overall contraction in sales momentum, and the monthly data negated the chances of the rebound expected by the surveyed economists. The context of this report is important, for after the recent low CPI reading in the UK, the chances of further BoE interest rate hikes have dropped significantly.

Today's data: 

• Retail sales for October in y/y terms. Currently: -2,7%. Expected: -1,5%. Previously: -1%. 
• Retail sales for October in m/m terms. Currently: -0,3%. Expected: 0,3%. Previously: -0,9%. 
• Retail sales (core) for October in m/m terms. Currently: -0,1%. Expected: 0,4%. Previously: -0,9%. 

At the moment, the money market is pricing in that the UK's tightening cycle is over, and the BoE will not decide on further moves. However, what if it comes to reductions? At this point, with a near 65.7% probability, the first such decision could come at the May 2024 decision.   

Current projections for the path of interest rates in the UK. Source: Bloomberg Finance L.P.

At the moment, the GBPUSD pair is losing nearly 0.24% on an intraday basis and is testing the support set by the 100-day exponential moving average (purple curve on the chart). If we would observe a continuation of the downtrend on the pair, the next point worth watching could be the structure of the near 50-day EMA (blue curve), which is further reinforced by the 50% Fibo retracement of the upward wave initiated in September 2022. The main resistance level for the upside may now be the local session high of November 14 near the 1.2500 level.

Source: xStation