The GBP/USD major currency pair is making a bullish consolidation. With all of this, investors are adopting a wait-and-see attitude ahead of significant trade talks between US Treasury Secretary Scott Bessent and China Vice Premier He Lifeng. Behind the scenes, the market is preparing for intense negotiations. As we can see in the first chart, the near-term trend for the GBP/USD pair appears bearish, remaining under the 20-day Exponential Moving Average (EMA) at about 1.3395.
As we noted on Friday, the Pound Sterling was a favorite among bidders against its major currency peers, supported in no small part by upbeat economic data. The flash S&P Global Purchasing Managers’ Index (PMI) data for October gave us a thrilling surprise jump. The Composite PMI jumped to 51.1—higher than the forecast of 50.6 and last month’s 50.1. The Manufacturing PMI rose to 49.6, blowing past the forecast of 46.6 and September’s 46.2 by a wide margin. The Services PMI beat expectations, at 51.1 vs. 51.0 forecast.
Adding to the positive sentiment, the Office for National Statistics (ONS) revealed that Retail Sales unexpectedly rose by 0.5% month-on-month in September. Consumer spending jumped 1.5%, well above the market consensus of 0.6%. This expansion by 1.2% further represents a positive correction from October’s 0.7% reading.
While these are promising numbers, the GBP/USD pair is still being pressured by outside forces. Bank of England (BoE) policymaker Swati Dhingra cautioned that US tariffs could exert downward pressure on inflation and economic growth, impacting the GBP/USD pair.
“Tariffs mean lower overall growth, and some downward pressure on prices in the medium term,” – Swati Dhingra
At the moment, the 14-day Relative Strength Index (RSI) for the GBP/USD currency pair balances around a key line of support at 40. A major break beneath this barrier would likely introduce new bearish momentum for the pair. Market watchers expect 1.3500, as a psychological level, to prove the next line of defense for the GBP/USD. This deterrent will likely affect its adoption and effectiveness in the short term. While resistance is expected near the low of 1.3140 from August 1.
Traders are looking ahead to the release of the US Consumer Price Index (CPI) data for September. They are looking for it to show a reacceleration to a 3.1% annualized pace, up from last month’s 2.9% print, which would potentially rewire market dynamics all over again. Among all economic releases, this one has the potential to be most impactful on the GBP/USD pair in the weeks ahead.