GBP/USD trades below 1.3000 as investors try to predict BoE's next move
- Retail sector in UK remained stagnant in January.
- US Dollar Index extends rally, looks to close above 98.
- FOMC and BoE meetings are expected to ramp up volatility.
After closing the first day of the week virtually unchanged near 1.3060, the GBP/USD lost its traction and dropped to its lowest level in a week at 1.2975. As of writing, the pair was down 0.48% on a daily basis at 1.2990.
Earlier in the day, the monthly data published by the Confederation of British Industry (CBI) revealed that retail sales volumes in the UK stayed unchanged for the third straight time in January.
Assessing the survey's finding, "2020 looks set to be another tough year for the sector as growth in households’ disposable income is set to remain modest and retailers continue to battle longer-term issues such as digital disruption and the cumulative burden of policy costs," said Anna Leach, CBI Deputy Chief Economist.
Markets unsure about BoE's next policy action
Following this data, investors are still unsure if the Bank of England (BoE) will opt out for a cut in its base rate this Thursday. Previewing the BoE event, "for the last year we've seen weak survey data, but the hard data strong enough to keep the BoE on hold," noted TD Securities analysts. "With that pattern having flipped, and hard data weakening but surveys pointing to optimism, the BoE cannot credibly say that now the survey data is sending the correct signal. The call is very close though, near 50-50."
On the other hand, the USD continues to find demand as a safer alternative ahead of the FOMC's policy announcements on Wednesday. After the US Census Bureau on Tuesday showed that Durable Goods Orders in December rose 2.4% to beat the market expectation of 0.5%, the US Dollar Index preserved its daily gains and now remains on track to close above the 98 mark for the first time since early December.
Technical levels to watch for