GBP/USD looks to regain 1.2100 on broad-based US Dollar weakness, mixed UK shopping data

• GBP/USD picks up bids to extend Friday’s recovery.
• UK shoppers’ footfalls jumped 50% last year but stayed well below pre-pandemic levels.
• Mixed US data, risk-on mood enable Cable buyers to keep the reins.

GBP/USD prints mild gains around 1.2085 as the Cable bulls cheer mixed UK statistics, as well as the broad-based US Dollar weakness during Tuesday’s sluggish Asian session.

Recently, the Financial Times (FT) conveyed the British shopping figures from retail intelligence provider Springboard that shows a 50% jump in footfall versus December 26 last year. However, the news mentioned that the foot traffic on the high street was down 25.3% compared with pre-pandemic in 2019, while for shopping centers it was down 36.9%.

On the other hand, the Core US Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s favorite inflation gauge, matched 4.7% YoY forecasts for November versus 5.0% prior. Further, the Durable Goods Orders for the said month marked a contraction of 2.1% compared to -0.6% expected and 0.7% previous readings. More importantly, the Nondefense Capital Goods Orders ex Aircraft marked improvement of 0.2% compared to 0.0% expected and 0.3% revised down prior. Additionally, the Federal Reserve (Fed) Bank of Atlanta’s GDPNow tracker rose to show +3.7% annualized growth for the fourth quarter (Q4) versus +2.7% previous estimates.

It should be noted that China scrapped the COVID quarantine rule for inbound travelers, starting from January 08, which in turn triggered the market’s risk-on mood. The news joined geopolitical fears emanating from Russia and North Korea to portray cautious optimism in the market. As a result, S&P 500 Futures rise 0.60% intraday to 3,892 whereas the US 10-year Treasury yields remain sluggish at around 3.74% by the press time. That said, the US Dollar Index (DXY) prints a three-day downtrend near 104.10 at the latest.

On a broader front, the UK’s recent headline numbers haven’t also been helpful for the Bank of England (BOE) to remain hawkish and hence the bullish bias over the GBP/USD pair remains limited.

Even so, the holiday season and a lack of major data/events could join the recently upbeat sentiment to favor GBP/USD bulls.

Technical analysis

A clear upside break of the two-week-old descending trend line, around 1.2055 by the press time, keeps GBP/USD buyers directed towards the convergence of a downward-sloping resistance line from December 20, as well as the 100-HMA, close to 1.2100.