The GBPUSD pair retreated sharply after the latest UK GDP and US retail sales numbers. It is trading at 1.3680, which was about 0.55% below the highest level this year.
UK GDP data
On Friday, the Office of National Statistics (ONS) published strong economic numbers from the UK. The numbers showed that the country’s economy did well in November as the Omicron variant crisis started. The economy expanded by 0.9% in November after it rose by 0.2% in the previous month.
Additional data by the ONS revealed that the manufacturing production rose by 0.4% in November while industrial production rose by 1.0%.
These numbers mean that the UK economy is doing well. Recent numbers have showed that the country’s property market has remained steady, with home prices rising sharply in December.
Last week, most retailers like Tesco, Marks and Spencer, Sainsbury’s, and Morrisons published strong updates for their holiday sales. Most of these firms even upgraded their outlooks for their quarterly earnings.
Later this week, the GBPUSD pair will react to additional data from the UK. On Tuesday, the ONS will publish the latest jobs numbers from the UK. Economists expect these numbers to show that the unemployment rate declined from 4.2% in October to 4.1% in November. The rate has been in a constant decline in the past few months.
Economists also expect the numbers to show that the country’s claimant count declined by over 38k in December.
UK inflation data
On Wednesday, the UK will publish the closely watched consumer inflation data. According to Investing.com, analysts polled by Reuters expect the data to show that the headline CPI rose from 5.1% in November to 5.2% in December. On a month-on-month basis, they expect that the CPI declined from 0.7% to 0.3%.
Excluding the volatile food and energy prices, analysts expect the data to show that the country’s inflation remained unchanged at 4.0% in December while the core CPI declined from 0.5% to 0.2%.
These numbers will come a week after China and the US published their inflation numbers. In the United States, the Bureau of Labor Statistics showed that the headline consumer inflation rose to a four-decade high of 7.0%. In China, the producer and consumer price index declined slightly, signaling that prices have peaked.
The ONS will then publish the latest UK retail sales numbers on Friday. Economists expect the data to show that retail sales declined slightly from 4.7% to 2.9% in December. Core retail sales, on the other hand, are expected to have fallen from 2.7% to 1.1%.
These numbers will come a day after the US published its retail sales numbers. The data showed that sales declined sharply in December as American sellers continued to worry about inflation.
The other catalyst for the GBPUSD pair will be the political dynamics in the UK. The prime minister was forced to apologize to the queen last week and there are signs that his tenure will be strained.
The two-hour chart shows that the GBPUSD pair formed a small double-top pattern at 1.3745, which was the highest level in months. In price action analysis, this pattern is usually a bearish sign. The pair remains slightly above the ascending trendline that is shown in black. It is also between the 25-day and 50-day moving averages. Therefore, the pair will likely retreat and retest the ascending trendline at 1.3610 and then resume the bullish trendline.