Pound Sterling delivers an upside move as robust UK Retail Sales push back BoE rate-cut bets.

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• Pound Sterling delivers an upside move as robust UK Retail Sales push back BoE rate-cut bets.
• Upbeat UK Retail Sales data indicate that the economy will come out of a recession.
• Trading volume in the FX domain would be light amid the holiday in US markets.

The Pound Sterling (GBP) demonstrates strength in Monday’s European session as the Bank of England (BoE) is expected to hold interest rates at their current level for a longer period. Persistent price pressures in the United Kingdom economy due to stubborn service inflation, steady labor demand, and robust household spending would allow BoE policymakers to maintain a hawkish narrative for a longer period.

Last week, the surprisingly upbeat UK Retail Sales data indicated that the impact of higher interest rates by the BoE on consumer spending is fading. This indicates that the UK economy would come out of the technical recession sooner than previously thought. The UK economy entered a technical recession in the second half of 2023 as the BoE maintained interest rates higher to tame high inflation, which impacted consumer spending and business operations significantly.

The GBP/USD pair rises as the Pound Sterling tends to attract higher foreign inflows when the BoE maintains a hawkish stance for longer. Going forward, action in the Pound Sterling and the US Dollar will be guided by the preliminary S&P Global Manufacturing PMI for February.

Pound Sterling rises to a near six-day high around 1.2620 as the market mood remains upbeat. The GBP/USD pair delivers a mean-reversion move to near the 50-day Exponential Moving Average (EMA), which trades around 1.2630, resulting in a “wait and watch” approach for market participants. The 200-day EMA near 1.2500 continues to support the Pound Sterling bulls.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating consolidation ahead.

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