GBP/USD rallies past 1.2600 as weak US Retail Sales sink the USD

• US Retail Sales plunge 0.9% in January, missing forecasts.
• UK GDP surprises to the upside, boosting Pound momentum.
• GBP/USD eyes 100-day SMA at 1.2694 despite Fed-BoE policy divergence.

The Pound Sterling rallied for the second consecutive day on Friday, reclaiming the 1.2600 figure following a dismal US Retail Sales report that reflected American consumers cut their expenses. The GBP/USD trades at 1.2626, up over 0.50%.

Sterling climbs past 1.2600 as UK data outperforms expectations

The financial markets narrative revolved around US President Donald Trump's tariffs, with the Greenback treading water. US Retail Sales data disappointed investors after contracting over -0.9% MoM in January, missing estimates of -0.1% and December figures upwardly revised by 0.7%.

Other data revealed that Industrial Production expanded in January, over 0.5% MoM down from December’s 1% but exceeded economists’ projections of 0.3%

Today’s data and better-than-expected Gross Domestic Product (GDP) figures in the UK keep the GBP/USD tilted to the upside. Buyers are eyeing a test of the 100-day Simple Moving Average (SMA) at 1.2694.

This is despite the divergence in monetary policy between the Federal Reserve and the Bank of England (BoE). The former is expected to keep policy in check, with 35 basis points of easing priced in by traders for the year’s end. Meanwhile, the BoE reduced borrowing costs last week, with two members voting for a 50-basis point cut.

Next week, the economic docket in the UK will feature BoE’s Baily, jobs data, the latest inflation report, and Retail Sales. On the US, the Fed parade will continue, the release of the latest FOMC meeting minutes, housing data, and S&P Flash PMIs.

GBP/USD Price Forecast: Technical outlook

The GBP/USD shifted neutral after witnessing a fall of close to 10% since September 26, 2024. However, buyers stepped in and pushed the pair above the 50-day Simple Moving Average (SMA) of 1.2472, taking advantage of a weaker US Dollar.

The Relative Strength Index (RSI) reveals that momentum shifted in favor of buyers; henceforth, further upside is seen. If GBP/USD climbs past the 100-day SMA, the next resistance would be 1.2700, followed by the 200-day SMA at 1.2786.

Conversely, if GBP/USD drops below the February 5 daily high at 1.2549, the next support would be the 50-day SMA at 1.2472.