GBP/USD edges lower on Friday, trading around 1.3626 after retreating from 1.3675, its highest level since February 11. Despite the modest pullback, Sterling remains on track to gain more than 0.60% for the week as investors weigh disappointing UK retail sales against stronger US services activity.
US economic data delivered a mixed picture. The S&P Global Services PMI climbed sharply to 56.8 in August from 54.6, comfortably exceeding expectations of 54.0 and signaling stronger expansion in the services sector. However, the Manufacturing PMI eased to 53.2 from 53.9, falling short of forecasts and pointing to some moderation in factory activity.
The US Dollar has found additional support from higher Treasury yields. The US Dollar Index is holding near 98.88, while the 10-year Treasury yield has risen almost three basis points to around 4.736%, approaching its weekly peak.
The rise in yields follows the US Treasury’s decision to purchase $4 billion of longer-dated bonds in the 10-to-30-year maturity range to improve market liquidity. Although the move was initially anticipated by investors, its supportive impact has faded as markets increasingly interpret the purchases as resembling an attempt to influence the yield curve.
Attention now turns to the Jackson Hole symposium, where traders will closely follow Federal Reserve Chair Kevin Warsh’s speech for clues about the future path of US interest rates. A hawkish message could strengthen the Dollar and limit GBP/USD’s upside, while a dovish tone could reinforce Sterling’s recent gains.
In the UK, retail sales weakened unexpectedly, falling 0.5% month-on-month in July after rising 0.7% previously. Despite the disappointing consumption data, markets continue to price in another Bank of England rate hike, supported by recent inflation and economic growth figures.
Trade idea:
GBP/USD remains bullish above 1.3580; buying dips near 1.3600 could target 1.3700, while a break below 1.3580 may expose 1.3500.