• The UK economy unexpectedly contracted in October.

• The pound has lost nearly 2% of its value against the dollar this week.

• Market participants are awaiting the US retail sales report.

The GBP/USD price analysis shows an unexpected contraction in the UK economy, which has put the pound in a vulnerable position. On the other hand, the dollar is heading for a weekly gain amid optimism that Trump’s policies will spur growth. Meanwhile, investors remain cautious ahead of the US retail sales report.

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Data on Friday revealed that the UK economy unexpectedly contracted in October. The GDP came in at -0.1%, compared to estimates of a 0.2% increase. This was a disappointment for the new government which is focused on increasing economic growth. At the same time, it increased pressure on the Bank of England to continue lowering borrowing costs.

The pound has had a rough week that has ended with downbeat data. It has lost nearly 2% of its value against the dollar.

Meanwhile, analysts are projecting robust growth and high inflation in the US under Trump’s administration. Consequently, the greenback has rallied to a one-year high against most of its peers. Inflation data on Wednesday failed to capture traders’ attention as it aligned with expectations.

However, Powell’s speech on Thursday further boosted the dollar. The Fed Chair said there was no hurry to lower borrowing costs since the economy remained strong. His remarks led to a sharp drop in Fed rate cut bets, with markets now pricing a 48.3% chance of a rate cut in December.

Market participants are awaiting the US retail sales report for more clues on Fed policy. A higher-than-expected reading will further slash bets for a December rate cut. On the other hand, a downbeat report will weigh on the dollar.

GBP/USD key events today

• US core retail sales m/m
• US retail sales m/m

GBP/USD technical price analysis: Downtrend pauses, but bears eye 1.2600

On the technical side, the GBP/USD price has paused its decline at the 1.2650 support level. The price trades well below the 30-SMA, and the RSI is still near the oversold region. Therefore, the pair has a strong bearish bias.

A pullback would retest the 1.2750 resistance level or the 30-SMA before bears take back control. Meanwhile, a strong catalyst might allow the downtrend to continue beyond the 1.2600 key psychological level.

https://www.forexcrunch.com/blog/2024/11/15/gbp-usd-price-analysis-uk-economy-records-surprise-downturn/