British Pound flatlines above 1.3350, UK Retail Sales data in focus

On Friday morning in Asia, the value of the British pound to the US dollar remained stagnant near 1.3360. Market participants remain attentive to new interest rate decisions and signals from both the U.S. Federal Reserve and the Bank of England. The UK's August retail sales figures are slated for release later on Friday. The Bank of England's Monetary Policy Committee held its rate at 3.75% on Thursday, even as inflation surpassed its 2% target.

Despite this, officials indicated a rate hike was becoming more probable. Three members voted to raise the rate by 25 basis points to 4.0%.

Meanwhile, the U.S. Federal Reserve announced a quarter-point increase on Wednesday, the first such hike in the Fed since 2023. Fed Chair Kevin Warsh stated that "the plain fact is that inflation is too high and has been for too long." "This summer's inflation readings do not indicate that underlying trends have significantly improved," he added. Analysts now give a 53.1% chance of another U.S. rate hike during the Fed's October meeting, up from around 44% the previous day, according to the CME FedWatch tool.

Scotiabank analysts note the pound has gained slight strength against the dollar, extending its modest recovery following the Bank of England's cautious stance. They also point out that "yield spreads now offer support to the GBP as markets show more confidence in the UK's fiscal outlook in response to Chancellor Jeremy Hunt's budget remarks."

On a daily chart, GBP/USD shows a bearish short-term pattern, with the price below a cluster of volatility and trend indicators. It sits below the 20-day Bollinger simple moving average and the lower band, while the 100-day moving average at 1.3438 adds medium-term resistance. The 14-period Relative Strength Index at 31.3 is nearing oversold levels, suggesting that downside momentum may be excessive but not yet accompanied by a substantial rebound towards resistance levels.

The immediate resistance level on the upside is the lower Bollinger band near 1.3365, followed by the 100-day moving average at 1.3438, reinforcing the prevailing downtrend. Should bulls manage to break through these barriers, they would face further resistance at the 100-day moving average and the upper Bollinger band at 1.3515, before encountering stronger support at the upper band near 1.3670.

With no clear support below the current price, the pair remains susceptible to additional selling while trading under this clustered resistance zone.