GBP/USD steadies near 1.1450 amid Fed vs. BoE battle, UK Retail Sales, US Michigan CSI eyed

• GBP/USD holds lower ground at the yearly low marked in the last week.
• Sluggish yields, short-term technical hurdle probes US dollar bulls ahead of data.
• Hawkish Fed bets jostle with the BOE concerns amid record high UK inflation expectations.
• UK Retail Sales for August, Preliminary Michigan CSI for September will offer immediate direction ahead of next week’s FOMC.

GBP/USD treads water around 1.1460 as bulls and bears jostle ahead of the key UK/US data on Friday. The Cable pair’s latest inaction could also be linked to the recently increasing hawkish bias for the Bank of England (BOE), as well as the firmer odds of the Fed’s aggression.

Record high inflation expectations in the UK, as well as the increasing confidence in the BOE, challenge the GBP/USD bears of late. The quarterly survey conducted by the Bank of England (BOE)/ Ipsos showed that the public's year-ahead inflation expectations jumped to an all-time high of 4.9% for 2023. Also, the net public confidence in BOE-7% vs -3% in May.

Also positive for the GBP/USD prices are the headlines surrounding Brexit as the UK told the European Union (EU) that the border checks between Northern Ireland and the rest of the UK will remain suspended despite legal threats from Brussels, per the UK’s Daily Mail.

On other hand, the US Dollar Index (DXY) retreats to 109.60 as the US 10-year Treasury yields dropped 1.7 basis points to 3.442% after rising 1.38% the previous day.

Even so, the latest readings of the hawkish Fed bets from the CME’s FedWatch Tool suggest the market priced in the Fed’s 0.75% and 1.0% rate hikes during the next week’s Fed meeting with 77% and 23% chances, which in turn keeps DXY bulls hopeful.

Additionally, the risk-negative headlines surrounding China and Europe also favor the GBP/USD bears. That said, Reuters came out with the news stating that US President Joe Biden to hit China with broader curbs on US chip and tool exports. Previously, Bloomberg ran a piece suggesting that China is likely to witness harder days than it witnessed in 2020. On the same line was the news surrounding the Sino-American tussles and the People’s Bank of China’s (PBOC) inaction. Elsewhere, fears that the Eurozone will remain in dire conditions despite having a good stock for winter joined hawkish comments from the European Central Bank (ECB) policymakers to keep the oil traders as pessimists.

Amid these plays, S&P 500 Futures track Wall Street’s losses while the prices of oil and gold stabilize.

Moving on, UK Retail Sales for August, expected -0.5% MoM versus 0.3% prior, will be crucial for the GBP/USD pair considering its lion's share in the UK Gross Domestic Product (GDP). Should the figures manage to offer a positive surprise, the quote could extend the latest rebound.

Though, preliminary readings of the Michigan Consumer Sentiment Index (CSI), expected 60 versus 58.2 prior, will be crucial for intraday directions. Above, the chatters surrounding the UK’s politics and Brexit, as well as the Fed, are crucial for the pair traders to watch for fresh impulse.

Technical analysis

The GBP/USD pair’s U-turn from the 21-DMA, around 1.1650 by the press time, directs the bears towards refreshing the yearly low. As a result, a four-month-old downward sloping support line near 1.1330 gains the market’s attention.