GBP/USD plummets to 1.2960 area, lowest since November 2020 on weaker UK data
- A combination of factors dragged GBP/USD to a fresh YTD low on the last day of the week.
- Disappointing UK Retail Sales figures turned out to be a key factor that weighed on sterling.
- Bets for aggressive Fed rate hikes and the risk-off mood underpinned the safe-haven USD.
The GBP/USD pair witnessed aggressive selling during the early European session and dived to a fresh YTD low, around the 1.2960 region in the last hour.
Following a brief consolidation, the GBP/USD pair met with a fresh supply for the second successive day on Friday following the disappointing release of the UK monthly Retail Sales figures. The UK Office for National Statistics reported that the total value of sales at the retail level declined by 1.4% in March as against expectations for a reading of -0.3%. Adding to this, sales excluding the auto motor fuel sales also missed consensus estimates and fell by 1.1% during the reported month.
On the other hand, the US dollar remained well supported by firming expectations for a more aggressive policy tightening by the US central bank. In fact, Fed Chair Jerome Powell on Thursday confirmed a 50 bps rate hike at the upcoming policy meeting on May 3-4 and also hinted at consecutive increases this year. This, in turn, pushed the yield on the rate-sensitive 5-year US government bond above 3% for the first time since 2018, which, along with the risk-off impulse, underpinned the buck.
Apart from this, the possibility of some trading stops being triggered below the 1.3000 psychological mark further seemed to have aggravated the bearish pressure around the GBP/USD pair. Meanwhile, the latest leg down now seems to have confirmed a fresh breakdown, setting the stage for a further near-term depreciating move. Market participants now look forward to the release of the flash PMI prints from the UK and the US for a fresh impetus. Traders will further take cues from the Bank of England Governor Andrew Bailey's appearance later during the US session for some meaningful opportunities.
Technical levels to watch