Pound Lingers at Seven-Week Lows Amid Diverging Monetary Policies
The British Pound (GBP) has shown some slight resilience against the US Dollar (USD) on Friday, but remains on track for a 1.15% weekly decline. This comes despite a surprise increase in UK Retail Sales data, which rose 0.5% in August.
Data released by the UK National Statistics Office revealed that retail consumption was up across the board, with sales of all other products excluding fuel rising 0.6%. The Pound had initially dropped on Wednesday after the Bank of England (BoE) kept interest rates steady at 3.75%.
The BoE's decision and Governor Andrew Bailey's comments on monetary policy tightening failed to provide support for the Pound, which has been weighed down by diverging monetary policies with the Federal Reserve (Fed). The Fed hiked interest rates by 25 basis points to the 3.75%-4% range, with Chairman Kevin Warsh reiterating that inflation is the main focus.
Strategists at UOB Group note that while the Pound's risk remains on the downside, conditions are deeply oversold, and it's unclear whether the Pound has sufficient momentum to reach 1.3300. A breach of the 'strong resistance' at 1.3435 would indicate stabilizing weakness in the Pound.