The British pound remains stable in Monday’s North American session, with GBP/USD marginally up by 0.05%, trading at 1.2445. This comes as traders await key employment data from the UK, set for release on Tuesday, which could influence the Bank of England’s approach to interest rates in the face of ongoing inflation concerns.

In the U.S., consumer confidence remains high as evidenced by robust retail sales figures for March, which exceeded expectations. Retail sales climbed 0.7% month-over-month, outpacing the revised 0.9% increase in February and surpassing forecasts of a 0.3% rise. The strength in consumer spending was broad-based, with gains recorded in eight of thirteen categories. Notably, sales excluding gasoline and automotive parts surged by 1%, significantly ahead of the 0.4% prediction and up from a revised 0.6% the previous month.

These strong economic indicators, including higher-than-expected inflation and nonfarm payroll figures, suggest that the U.S. economy continues to exhibit robust growth. This dynamic economic environment reduces the likelihood of the Federal Reserve implementing rate cuts in the near term. Current market sentiment, as tracked by the CME FedWatch tool, shows a significant adjustment in expectations, with the probability of a rate cut by September falling to 65% from 93% just a month ago.

On the UK front, the imminent employment report will be critical for the Bank of England (BoE), which is closely monitoring wage growth as a key driver of inflation. Recent figures indicated a slight decrease in average earnings excluding bonuses, from 6.2% to 6.1% over the three months to January. The BoE, which meets next on May 9th, is anticipated to maintain interest rates, marking the fifth consecutive hold, despite internal divisions regarding future rate policies. While Governor Bailey has suggested that rate cuts this year are plausible, other Monetary Policy Committee members like Megan Greene and Jonathan Haskel advocate for a more cautious approach, suggesting that cuts should remain distant.

Technical Analysis for GBP/USD:

  • Resistance levels are identified at 1.2535 and 1.2620.
  • Support is found at 1.2481 and 1.2396.

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