GBP/USD refreshes day high at 1.2050 as DXY tumbles at open, Fed policy eyed

• GBP/USD is indicating a bullish open test-drive session as DXY has tumbled at open.
• The DXY has picked offers as retail demand is displaying downside signals.
• Lower Average Hourly Earnings and a slump in retail sales may restrict BOE to turn extremely hawkish.

The GBP/USD pair has printed a fresh intraday high at 1.2053 as the US dollar index (DXY) has witnessed a steep fall at open. The cable is marching sharply higher and has displayed a bullish open test-drive structure. The aforementioned structure indicates a firmer bullish trading session for the whole day as pound bulls have defended the opening downside pressure and are scaling higher strongly.

The DXY has witnessed a steep fall as retail demand has hit hard in the US economy. The US Consumer Confidence has trimmed to 95.7 vs. the June figure of 98.4. Also, the economic data has dropped lowest to February 2021. Apart from that, US giant retail chain operator Walmart reported downbeat earnings.

The underperformance of Consumer Confidence and softer earnings by retail giant indicate that retail demand has been hit dramatically by soaring price pressures. The investing community should be aware of the fact that the US Retail Sales data remained upbeat after landing at 1%, higher than the expectations of 0.8% but they were contaminated by higher energy bills and costly food products. This may compel the Federal Reserve (Fed) to trim the extent of hawkish guidance as a rate hike by 75 basis points (bps) is imminent.

Meanwhile, the UK economy is already going through a tough phase as the inflation rate has climbed to a high of 9.4% and the Bank of England (BOE) is not finding strength from the UK economic indicators to accelerate interest rates unhesitatingly.  The BOE has no other choice than to scale its interest rates higher but slippage in overall demand and lower wage growth will trigger recession fears vigorously.