Insights 
VT 
During the North American session, the Pound Sterling saw minimal losses following disappointing UK Retail Sales data. The GBP/USD is currently trading at 1.3456, down by 0.07%.
Concerns grew after reports suggested the US might revoke waivers for allies with semiconductor plants in China. The US Dollar Index (DXY) showed minimal losses of 0.10%, trading at 98.62, but is set for weekly gains above 0.57%.
US Economic Slowdown
In the US, the economy shows a slowdown, evidenced by the Philadelphia Fed Manufacturing Index, which remained at -4. The Fed’s report highlighted early signs of tariffs contributing to inflation, though the full impact remains unquantified.
The UK Retail Sales experienced a severe monthly decline of -2.7% in May, unexpectedly surpassing forecasts. This followed the Bank of England’s decision to keep rates unchanged, which was seen as dovish.
The UK and US economic calendar for next week includes speeches by BoE members, GDP figures, and Flash PMIs. Technical analysis for GBP/USD suggests upward bias remains, with key support levels at 1.3450 and 1.3400, while targeting 1.3550 if bulls regain 1.3500.
Retail data from the UK took markets by surprise, posting a sharper drop than anticipated, driven largely by waning consumer appetite and tightening household budgets. The monthly figure of -2.7% underscores just how much energy and food inflation has been eroding discretionary spending. Traders would be wise to remember that such dramatic swings tend not to stabilise quickly without either policy pivot or a strong bounce in sentiment indicators.
Central Bank Hesitancy
Bailey’s decision to hold rates steady, despite inflationary pressures remaining higher than the 2% target, was interpreted as soft guidance—implying more concern about growth trajectories than wage spirals for now. That said, the accompanying commentary suggested no rush to cut either. What this leaves us with is a central bank hesitant to act unless forced by hard data rather than forecasts. This hesitancy has tempered previous speculation of a summer hike, leading to subdued Sterling demand on rate expectations alone.
On the US side, the Federal Reserve’s regional gauge out of Philadelphia printed another negative read, holding at -4. This flattish figure, while not worsening, reinforces the sense that American industrial activity isn’t accelerating. Coupled with early signs that trade measures are nudging up input costs, this adds a layer of uncertainty to inflation expectations for Q3. While Powell hasn’t been explicit about adjusting policy timelines as a response, these inputs will likely feature in coming dialogues from the Fed.
Meanwhile, whispers around Washington’s stance on semiconductor technology and cross-border production stirred mild risk-off sentiment late in the session. If enforced, the revocation of waiver arrangements could pull ripples through global supply chains, particularly where Taiwan and South Korea are involved. While markets haven’t fully priced in hard consequences yet, such regulatory moves have historically prompted defensive positioning in currency and equity derivatives.
Technically, the 1.3450 level has proven to be a reliable floor for GBP/USD, with buying pressure often returning beneath it. That said, to build conviction for further Sterling gains, we’d need to see a clean reclaim of 1.3500 with strength and volume, ideally supported by at least one bullish UK PMI surprise next week. Should momentum carry through, 1.3550 may come into focus relatively quickly—but only if macro data begins to outperform.
Volatility may tighten ahead of next week’s calendar, which includes Flash PMIs for both sides of the Atlantic and GDP prints out of the UK. Broadly, rates pricing remains stable, but reaction sensitivity can’t be dismissed—especially if any BoE speaker deviates from the consensus tone or if US growth readings drip further into contraction. As always, keeping a tight watch on relative yield spreads could offer clearer insight into directional risks.
As we head into the next stretch, volatility clusters are more likely around macro releases—less so from central bank decisions, at least until Jackson Hole. For now, sensitivity remains tethered to data. Traders positioning into next week would do well to examine response levels rather than forward expectations.
