GBP/USD reclaims 1.2000 as DXY extends losses, UK Retail Sales in focus

• GBP/USD has kissed an intraday high of 1.2000 as DXY sees more downsides.
• UK’s core CPI shifts minutely lower to 5.8% which indicates that price pressures are near to peak.
• The overall demand in the UK looks vulnerable as Retail Sales may slip further despite higher inflation.

The GBP/USD pair has touched an intraday high of 1.2000 after concluding its time correction. The cable has been underpinned by the market participants as the US dollar index (DXY) has extended its losses to near 106.70. The DXY is expected to extend its losses after violating Wednesday’s low at 106.39.

On the pound front, price pressures have remained on the higher side led by volatile oil and food prices. However, the core Consumer Price Index (CPI) has shown some exhaustion. The overall inflation rate landed at 9.4%, higher than the expectations of 9.3% and the prior release of 9.1%. While the core CPI remained in line with the estimates at 5.8% and lower than the former print of 5.9%. No doubt, the volatile oil prices have shown their impact on the overall inflation rate. However, the core CPI has shown some exhaustion signals, which may trim bumper rate hike expectations.

Talking upon the UK political front, it is official that ex-Chancellor Rishi Sunak and Foreign Minister Liz Truss, are left in the race to be the next UK PM. These two will be voted on during the next seven weeks to September.

Going forward, UK Retail Sales will be of utmost importance. On an annual basis, the economic data may slip to -5.3% vs. -4.7% recorded earlier. This indicates the vulnerability in the overall demand in the UK. The Retail Sales data is already contaminated with higher price pressures and more damage to the Retail Sales indicates that the overall demand is extremely lower.