GBP/USD slides below 1.2300 as downbeat UK Retail Sales join political jitters

• GBP/USD takes offers to justify downbeat UK Retail Sales data for May.
• UK Retail Sales shrank more-than-expected on YoY but improved on MoM.
• Conservatives Chairman Oliver Dowden resigns after a humiliating defeat in UK by-elections.
• USD pullback tests bears but recession woes, BOE-linked disappointment keep bears hopeful.

GBP/USD slips 20-pips to refresh intraday low around 1.2259, near 1.2270 by the press time, as the UK Retail Sales continued raising concerns over the British economic growth. In addition to the British data, the Conservative Party’s defeat in the UK by-elections also weighs on the Cable pair.

UK Retail Sales improved from -0.7% expectations to -0.5% MoM, versus downwardly revised 0.4% prior. However, the slump in the yearly figures, to -4.7% from -5.7% previous readings and -4.5% forecast, seems to weigh on the GBP/USD prices of late.

On the previous day, the UK S&P Global PMIs also raised concerns over the British economic growth, as well as pushed the Bank of England (BOE) towards aggressive rate hikes. That said, UK’s S&P Global/CIPS Manufacturing Purchasing Managers’ Index (PMI) dropped to 53.4 in June, versus 53.7 expected and May’s final reading of 54.6. The Services PMI reprints the previous month’s final reading of 53.4 while staying below 53.0 forecasts.

It should be noted that UK PM Boris Johnson’s defeat in previously safe seats for the Conservatives Party during the by-elections also exerts downside pressure on the GBP/USD pair. Liberal Democrats Party won the Tiverton and Honiton seats while Labour Party won in Wakefield. Following the results, the Conservative Party Chairman Oliver Dowden resigned.

Elsewhere, the US dollar fails to cheer the corrective pullback in the Treasury yields amid broad fears of economic slowdown and faster rate hikes, not to forget more supply-chain woes. The US Dollar Index (DXY) drops 0.15% intraday to 104.25 at the latest. Further, US 10-year Treasury yields rebound from a two-week low, flashed the previous day, as traders await more clues to confirm the economic slowdown. Even so, the bond coupons brace for the first weekly loss in four while reversing from the highest levels since 2011, at 3.09% by the press time.

Having witnessed a downbeat reaction to the UK data, GBP/USD traders should pay attention to the risk catalysts for fresh impulse. As a result, BOE Chief Economist and Executive Director Huw Pill’s comments will be closely watched for clear directions.

Technical analysis

Despite the latest rebound, the 100-SMA could test the bulls around 1.2345. However, a six-week-old horizontal support area, around 1.2170-60, appears crucial support to restrict the Cable pair’s short-term downside.