GBP Holds Below 1.3450 After Disappointing UK Retail Sales

GBP/USD at 1.3450: Retail Sales Weigh on Sterling

The British pound is trading below 1.3450 against the US dollar after UK retail sales data missed expectations. The level represents a key psychological barrier that has resisted breakouts since early February. The data release triggered a round of selling that pushed cable through short-term support near 1.3470, leaving the pair exposed to a test of the 1.3400 handle.

Retail sales are a direct read on consumer demand, the main engine of UK GDP. A weaker print suggests household spending is softening under the weight of elevated interest rates and sticky inflation. For the pound, that is a double-edged signal. Lower consumption reduces services inflation – the Bank of England’s primary concern – but it also reinforces the narrative that the economy is losing momentum faster than policymakers anticipated.

The move in sterling is consistent with a repricing of BoE rate cut expectations. Markets now see a higher probability of a quarter-point reduction at the May or June meeting. The immediate effect is a widening of the rate differential with the US, where the Federal Reserve remains on hold. That differential is the dominant driver of GBP/USD at this time.

BoE Rate Path: Consumer Data Shifts the Calculus

The Bank of England’s last policy statement acknowledged that inflation is falling but warned that domestic price pressures, particularly in services, remain elevated. A soft retail sales figure undermines that warning. If consumers are pulling back, businesses will find it harder to pass on price increases, and the labour market should loosen. That sequence would accelerate the disinflation process and give the Monetary Policy Committee cover to cut rates sooner.

Traders should track the next batch of UK data, especially January’s CPI and the February services PMI. A downside surprise in either would reinforce the retail sales signal and could push GBP/USD toward 1.3300. Conversely, a rebound in retail sales or a hot CPI print would likely reverse the move, putting 1.3550 back in play as resistance.

The positioning picture is worth attention. The Commitments of Traders report shows speculative shorts in sterling have been building since mid-December. A break below 1.3450 could accelerate that positioning, as stop-loss orders cluster just beneath the level. Any extension lower will feed on itself until a clear catalyst, such as a hawkish BoE commentary, intervenes.

Next Catalyst: UK Inflation and Services PMI

The immediate focus for GBP/USD is the UK CPI release scheduled for next week. Core inflation and services inflation will be the critical components. If they print in line with expectations or higher, the pound could recover lost ground. A miss would confirm the retail sales signal and likely trigger a move toward 1.3300.

The services PMI from S&P Global follows a few days later. A reading below 50.0 would indicate contraction in the dominant sector of the UK economy and would strongly reinforce the case for early BoE cuts. Traders should also watch for any comments from BoE Governor Andrew Bailey or Chief Economist Huw Pill in the intervening days. Any dovish lean would compound the pressure on sterling.

For practical positioning, the pip calculator and position size calculator in AlphaScala’s toolbox can help manage risk on the pair as volatility picks up. The correlation matrix may also be useful to check whether EUR/USD is providing an anchor or amplifying GBP moves.

A decisive close below 1.3450 would shift the short‑term trend from neutral to bearish. Until the data calendar provides a clear counter-signal, the bias favours the seller toward 1.3300.