Gbp/usd drops as Trump wins presidency and UK retail sales decline

GBPUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.66%	-86 Pips
Week to-date	-0.58%	-74.9 Pips
November	-0.15%	-19.4 Pips

Upcoming key events (London Time)

Thu 12:00 PM GBP Bank of England Interest Rate Decision (Bank Rate)
Thu 07:00 PM USD Fed Interest Rate Decision (Federal Funds Rate)

What happened lately

In the United States, Donald Trump has been elected as the 47th president after securing a victory over Kamala Harris in the 2024 presidential race. This development underlines a significant political shift as Trump returns to office, and it could reverberate through economic circles globally. Trump’s presidency could potentially bring back policies from his previous term, which may include tax cuts, deregulation, and a focus on America-first trade policies. These initiatives might fuel expectations of economic growth in the US, albeit possibly coupled with increased geopolitical tensions, especially with China. The already volatile markets could see increased uncertainty impacting the dollar and global markets substantially.

Across the Atlantic, the United Kingdom’s BRC Like-for-Like retail sales witnessed a notable downturn in October, decreasing to 0.3% from September’s 1.7%. This decline signals a weakening in consumer spending, which might reflect broader economic challenges amid cost-of-living pressures and slower economic growth. Businesses might face declining revenues, impacting their profitability, potentially leading to shifts in hiring or wage policies. The cooling effect on retail sales underlines the pressure on the Bank of England to carefully consider its monetary policy in supporting the economy while tackling inflation whenever necessary.

Regarding the GBPUSD exchange rate, recent fluctuations saw the pairing drop by 0.66% to a value of 1.28785. This dip was primarily driven by the weakening retail sales data from the UK, emphasizing a challenging economic environment. As the anticipation builds around upcoming central bank announcements, especially the Bank of England’s interest rate decision, volatility is expected to persist. A rate increase may support the pound, whereas a hold or cut could pressure the GBPUSD further downward. On the other side, the Federal Reserve’s decision on the interest rate will significantly affect the US dollar. Any indication of continued rate hikes to counter inflation might strengthen the dollar, causing additional pressure on the pound. Traders should remain attentive to these developments, as they could lead to sharp currency reactions depending on the central banks’ policy stances.

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What can we expect from GBPUSD today?

GBPUSD on Wednesday dropped -0.66% to 1.28785. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for GBPUSD looks bearish as the pair posted lower in Wednesday trading session.

Looking ahead for the day, immediate support level is at S1 1.27923 with break below could see further selling pressure towards S2 at 1.27061. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.30475 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.28337 would indicate selling pressure.

For the week to-date, take note that GBPUSD is mixed as compared to the prior week.

Key levels to watch out:

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