British Pound languishes at seven-week lows despite bright UK Retail Sales data

The British Pound experienced a decline to seven-week lows on Friday, despite a stronger-than-expected increase in UK Retail Sales. The GBP/USD pair stood at 1.3370, just ahead of the London session opening, on course for a weekly decline of 1.15%. This decline followed divergent monetary policy decisions between the Federal Reserve and the Bank of England.

UK Retail Sales rose 0.5% in August, surpassing the market's expectation of a 0.2% contraction, and excluding fuel, sales of other products increased by 0.6%. The Pound faced selling pressure on Wednesday as the Bank of England kept its Bank Rate steady at 3.75%, with no members advocating for a rate increase. The Bank of England Governor acknowledged the possibility of further tightening if the Middle East conflict persists and risks of second-round effects rise.

Meanwhile, the Federal Reserve took a more hawkish stance, raising interest rates by 25 basis points to the 3.75%-4% range, with Chairman Kevin Warsh emphasizing that inflation remains the primary focus, signaling more potential tightening. Strategists at UOB Group noted that while the pound's risk remains on the downside, conditions were oversold, and it was unclear if GBP had enough momentum to reach 1.3300. A breach of the "strong resistance" at 1.3435 would indicate stabilizing weakness in GBP.