GBP/USD: GBP to USD Rate Crumbles as King USD Returns
The GBP/USD price crashed to the lowest level since July 15 as the US dollar made a strong comeback. It was trading at 1.1833, which was about 3.77% below the highest level this month. The EUR/USD, on the other hand, is eying the parity level.
King dollar makes a comeback
The GBP/USD price crash accelerated on Friday as investors shifted to the relatively strong US dollar. It crashed even after the UK published strong retail sales data. According to the Office of National Statistics (ONS), UK’s retail sales rose by 0.3% in July after falling by 0.2% in June. Similarly, core retail sales that exclude the volatile food and energy prices, rose from 0.2% to 0.4% in July.
These numbers show that the British consumer is still spending even as inflation surges. Data published on Wednesday revealed that the country’s inflation surged to 10.1% in July. This was the biggest increase in more than three decades. Core inflation also continued rising in July.
According to the ONS, the situation will likely continue worsening in the coming months. For one, gas prices will continue rising as we head to winter. Experts believe that the country does not have enough gas in storage to last through winter.
The GBP/USD price also declined as investors reacted to the recent Fed minutes. The minutes revealed that the Fed will continue hiking interest rates in the coming months in a bid to fight inflation. Most economists expect that the bank will hike rates by 0.50% in September. It will then increase rates by 0.25% in the final two meetings of the year.
The four-hour chart shows that the GBP/USD price has been in a strong bearish trend in the past few days. This decline happened after the pair formed a double-top pattern at 1.2288. In price action, this is usually one of the most accurate bearish patterns.
The pair has moved below the neckline of this pattern at 1.200. It also moved below the 25-day and 50-day moving averages. Therefore, it will likely continue falling as sellers target the next key support at 1.1700.