UK Data Falls Flat as Pound Struggles Against Dollar

Despite strong UK data, including retail sales and Purchasing Managers' Index (PMI) surprises, the British Pound (GBP) is struggling to gain ground against the US Dollar (USD). According to Scotiabank strategists Shaun Osborne and Eric Theoret, markets are ignoring these fundamentals in favor of expectations surrounding next week's Bank of England (BoE) meeting.

The BoE is expected to hold a hawkish stance, with rate markets pricing modest tightening by September and November. This has led to renewed demand for downside protection in GBP, as evidenced by the options market. The strategists note that politics and geopolitics are also contributing to the Pound's weakness, driving up UK government bond yields and threatening the country's fiscal situation.

The data released recently showed strong retail sales for June and a solid surprise in the preliminary PMI for July. However, these figures seem to be having little impact on the Pound's performance against the USD. The strategists conclude that the RSI remains close to neutral, with support found at 1.3150 and resistance at 1.3550.