GBP/USD flirts with 1.2630 resistance as UK spending details linger, focus on US Factory Orders

• GBP/USD struggles to extend the previous day’s rebound from multi-month low as 50-SMA prods Cable buyers.
• UK BRC Like-for-Like Retail Sales growth rallies but Barclay card data suggests deterioration in British spending.
• US Dollar edges higher while tracing yields as full markets return.
• Final readings of UK S&P Global/CIPS PMIs for August, US Factory Orders eyed for intraday directions.

GBP/USD justifies the Cable traders’ indecision amid mixed catalysts while making rounds to 1.2630 heading into Tuesday’s London open. Apart from the unclear signals, the cautious mood ahead of the key US and UK data also prods the Pound Sterling moves of late.

Earlier in the day, Reuters came out with the Barclay Card data while saying, “Annual growth in the UK consumer spending on credit and debit cards slowed to 2.8% in August from 4.0% in July.” However, the UK’s BRC Like-for-Like Retail Sales grew 4.3% YoY for August versus 1.8% prior.

While the British spending details are mixed, a suggestion from the UK Think Tank to infuse more liquidity into the UK capital markets with pensions seems to lure the Bank of England (BoE) hawks, due to the likely lift to the inflation, which in turn lures the Pound Sterling bulls.

Elsewhere, the US Dollar Index (DXY) prints mild gains around 104.25, after pausing a two-day uptrend the previous day, as it traces the firmer US Treasury bond yields ahead of the key US data. That said, the US 10-year Treasury bond yields rose three basis points (bps) to 4.21% after a holiday-driven inaction.

It should be noted that Friday’s mostly upbeat US jobs report and hawkish Fed talks, as well as the challenges to sentiment emanating from China, seem to keep the Greenback firmer of late. That said, the US Nonfarm Payrolls (NFP) renewed hawkish bias about the Fed, even if the Unemployment Rate and Average Hourly Earnings kept the policy pivot concerns on the table afterward. Following that, the global rating agency Moody’s revised up the US Gross Domestic Product (GDP) predictions for 2023 to 1.9% versus 1.1% expected in May. That said, Federal Reserve Bank of Cleveland President Loretta J. Mester defended the US central bank’s hawkish move and ruled out the rate cut bias in her speech on Friday.

On a different page, the market’s lack of confidence in the Chinese measures to defend the economy, as well as the recent Sino-American tensions over Taiwan and the US businesses’ discomfort in Beijing, prod the market sentiment and put a floor under the US Dollar. It should be noted that China recently announced a slew of quantitative and qualitative measures to defend the economy from COVID-19. On the same line is the latest news suggesting the ability to avoid default by China’s biggest reality player Country Garden.

Against this backdrop, S&P 500 Futures prints mild losses while the Asia-Pacific equities edge higher.

Looking forward, the final readings of the UK PMIs for August and the Bank of Japan (BoJ) concerns may entertain the intraday traders ahead of the US Factory Orders for July. Should the scheduled statistics keep suggesting a less dovish Bank of England (BoE), versus the Fed’s capacity to keep the rates higher for longer, the GBP/USD pair may witness a pullback.

Technical analysis

Even if the 50-SMA on four, close to 1.2630 by the press time, restricts the immediate upside of the GBP/USD pair, its successful rebound from an ascending trend line stretched from late May, around 1.2580 by the press time, joins the looming bull cross on the MACD to keep the buyers hopeful.