GBP/USD breaks below 1.3800 on mixed UK data, ahead Fed's Powell

• GBP/USD broke below 1.3800 on weaker than expected UK Retail Sales.
• The market sentiment is positive, but the British pound failed to capitalize on its risk-sensitive status.
• Investors’ focus turns to the Fed Chairman Jerome Powell, who is on the wires, 

The GBP/USD slides for the second day in a row, down 0.18%, trading at 1.3768 during the New York session at the time of writing. Worse than expected, UK retail sales data pushed the pair towards the Thursday low at 1.3776 but bounced off, failing to break above the 1.3800 figure.

The market sentiment is upbeat, with the US S&P 500 printing new all-time highs, while other major US equity indices rise between 0.17% and 0.33%, except for the Nasdaq Composite, which falls 0.36%.

The GBP could not extend its rally beyond 1.3800 amid risk-on market sentiment and dollar weakness

The British pound failed to capitalize on favorable market sentiment amid US dollar weakness across the board. The US Dollar Index, which tracks the greenback’s performance against a basket of its peers, drops 0.20%, sits at 93.58, underpinned by falling yields, for the first time in the week, losing one basis point, currently at 1.658% after touching a weekly high of around 1.70%. 

On the macroeconomic front, the UK docket featured the Retail Sales for September, which shrank 0.6% on a monthly basis, worse than the 0.2% expansion expected by analysts. Furthermore, the annual figure collapsed 2.6% versus a -1.7% estimated by investors. According to the Office of National Statistics, people reduce their spending in household hood stores (-9.3%), such as furniture and lighting stores, which was the driver for the fall in the figure.

Moving onto more UK economic data, the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) unexpectedly improved to 57.7 in October versus 55.8 expected and 57.1 – September’s final reading. Traders lifted the GBP/USD pair on the news, bounced off the day’s lows, and briefly broke the 1.3800 figure.

Across the pond, the US economic docket unveiled the  IHS Markit PMI for Manufacturing and Services for October, offering mixed figures. The Market Manufacturing PMI rose to 59.2, lower than the 60.3 estimated. Regarding the Markit Services PMI, it grew to 58.2 higher than the 55.1 foreseen.

The Federal Reserve Chairman Jerome Powell is on the wires. Investors’ focus turns to the Fed Chairman’s words, expecting hints or clues about bond tapering, monetary policy, or inflation.

GBP/USD Price Forecast: Technical outlook

The 1-hour chart depicts the pair is trading briefly above the Thursday lows (1.3775) as Jerome Powell takes center stage. In case of some hawkish remarks, the Wednesday low at 1.3742, followed by the Tuesday low at 1.3720, would be support levels for US dollar buys, to account for them. To the upside, the 1.3800 figure, followed by the weekly high around 1.3838, are resistance levels for GBP/USD traders.