GBP/USD retreats from weekly high at 1.2787, undermined by downbeat UK Retail Sales

• GBP/USD trades lower around 1.2720 on the back of softer UK Retail Sales.
• UK Retail Sales exhibited decreases both on a monthly and annual basis.
• US Dollar (USD) retreats amid improved US data; leading to a sense of caution in the market.

GBP/USD snaps the three-day winning streak, currently hovering around 1.2720 in the Asian session on Friday. The GBP/USD pair is experiencing downward pressure attributed to softer data on consumer spending from the United Kingdom (UK).

The data released on Friday revealed a decline in UK Retail Sales (MoM) to -1.2% from the previous 0.6%, significantly below the expected -0.5% for July. Moreover, the year-on-year figures showed a contraction of -3.2%, against the previous -1.6% and falling short of the projected -2.1%. Additionally, the monthly Retail Sales excluding Fuel experienced a drop to -1.4%, considerably below the consensus of -0.7% and the previous 0.7%. The annual rate also decreased to -3.4% compared to -2.2% expected in July and the prior reading of -1.6%.

Elevated risk aversion, coupled with robust United States (US) Treasury yields and persistent economic difficulties in China, are placing downward pressure on the GBP/USD pair. These factors could contribute to bolstering the strength of the Greenback and potentially influencing the overall direction of the Cable pair.

GBP/USD traders could adopt a more cautious stance following the release of better-than-anticipated UK inflation figures on Wednesday. This surge in data has propelled the pair's upward movement, potentially amplifying concerns regarding the possibility of interest rate hikes by the Bank of England (BoE) in the upcoming September meeting.

US Dollar Index (DXY) retraces gains achieved over the last three trading sessions. The DXY, which measures the performance of the Greenback against the six major currencies, treads water around 103.40. The pullback of the US Dollar (USD) occurs amid improved US data, leading to a sense of caution in the market as it seeks further signals about the inflation scenario.

As said, Initial Jobless Claims (Aug 11) decreased to 239K from the previous 250K, better than the projected reading of 240K. Moreover, the Philadelphia Fed Manufacturing Survey for August displayed improvement, with a rise to 12 from the prior -13.5, exceeding the expected -10.

In the upcoming week, investors will likely watch the release of US economic data, particularly concerning Home Sales and Manufacturing indicators with UK S&P Global/CIPS Composite PMI and GfK Consumer Confidence for August. These datasets could provide insights and perspectives about financial and economic sectors in both countries, helping to shape potential strategies for placing fresh bets on GBP/USD pair.

Furthermore, the Jackson Hole Symposium during the upcoming week, held annually, will serve as a significant point of interest. This event will convene central bankers, policy experts, and academics to thoroughly examine the global economic forecast, placing particular emphasis on addressing the current inflationary environment.