It has been a good week for the British pound, which has gained 1% against the dollar and climbed to levels not seen since Feb. 2022. The pound has rallied for three straight days but is almost unchanged on Thursday, trading at 1.3425 in the North American session.
UK retail sales expected to surge to 4.5%
The UK economy has been struggling but don’t blame consumers for not spending. Retail sales for April will be released on Friday and the markets are expecting a massive gain of 4.5% y/y. This follows a 2.6% gain in March which was a three-month high. Monthly, retail sales is expected to ease to 0.2% from 0.4%.
UK PMIs show slight growth
UK PMIs showed improvement in May after downward revisions in April. Services PMI rose to 52.3, up from a revised 50.8 in March and above the market estimate of 50.8. The Manufacturing PMI also improved to 52.3, up from a revised 50.2 and above the market estimate of 49.9. This indicates slight growth in business activity and manufacturing.
UK inflation for April was higher than expected, disappointing the Bank of England which wants to deliver additional rate cuts in order to boost the flagging economy. The BoE lowered rates in April by a quarter-point to 4.25% but a June cut is very unlikely after the hot inflation report.
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US PMIs accelerate
In the US, today’s PMI reports were better than expected. Manufacturing rose to 52.3, up from a downward revised 50.8 in April and above the market estimate of 51.0. This marked a three-month high. Services also accelerated to 52.3, up from 50.8 and above the market consensus of 50.8.
The Federal Reserve has been in a wait-and-see mode, primarily due to the uncertainty over the US tariffs, which have caused sharp swings in the financial markets. The Fed meets next on June 18 and is widely expected to hold interest rates.
GBP/USD Technical
- GBP/USD is testing resistance at 1.3429. Above, there is resistance at 1.3429
- 1.3410 and 1.3394 are the next support levels
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GBPUSD 4-Hour Chart, May 22, 2025
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