Pound Sterling gains ground against the US Dollar following stronger-than-expected UK Retail Sales data

The Pound Sterling (GBP) is attempting to recover near the intraday low of 1.3280 against the US Dollar (USD) during Friday’s European session, buoyed by unexpectedly strong UK Retail Sales data for March. Despite the positive UK data, the GBP/USD pair remains down about 0.3% on the day, as broad-based US Dollar strength continues amid optimism over a potential easing in US-China trade tensions.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, has rebounded to near 99.70 following a sharp pullback on Thursday. Market sentiment improved after the White House hinted that a trade agreement between the US and China could be on the horizon, with both countries possibly rolling back tariffs as a precondition for further talks.

US Treasury Secretary Scott Bessent added fuel to the optimism by stating that both Washington and Beijing agree that recent tariff levels are unsustainable and that reductions are likely. Supporting this narrative, Bloomberg reported that China is considering pausing a 125% import tariff on certain US medical equipment and industrial chemicals—an early signal that Beijing may be preparing to de-escalate trade tensions.

Meanwhile, a strong showing in US economic data added to the US Dollar’s momentum. Durable Goods Orders for March surged by 9.2%, far surpassing expectations of a 2% rise and February’s 0.9% increase. The sharp rise suggests that recent tariff measures may be feeding into domestic business activity. The data further reinforces the Federal Reserve’s cautious approach, with officials preferring to maintain current policy settings until they gain more clarity on the broader economic impact of recent developments.

Daily Market Movers: Sterling Boosted by UK Retail Surprise

• The Pound gained some support on Friday after the UK Office for National Statistics (ONS) reported that Retail Sales rose by 0.4% month-on-month in March—beating expectations of a 0.4% decline. February’s figures were revised down from a 1% increase to 0.7%. On an annual basis, Retail Sales jumped 2.6%, outperforming both the prior reading of 2.2% and the expected 1.8%.
• In theory, stronger consumer spending should prompt traders to scale back expectations of monetary easing by the Bank of England (BoE). However, market participants remain largely confident that the BoE will proceed with a 25 basis point rate cut in May, bringing the benchmark rate down to 4.25%. This is driven in part by global economic uncertainties linked to escalating tariffs and disappointing UK inflation data.
• BoE Governor Andrew Bailey, speaking at the IMF Spring Meetings in Washington, noted that the recent tariffs announced by the US and potential countermeasures from other countries could deliver a significant shock to UK economic growth. Still, Bailey dismissed fears of an imminent recession, stating: “I don’t think the UK economy is close to recession at the moment.” He emphasized that trade war risks must still be taken seriously.
• Markets are also watching for progress in trade negotiations between UK Chancellor of the Exchequer Rachel Reeves and US officials. Speaking to Newsmax on Thursday, Reeves expressed confidence that a trade agreement with Washington is within reach.

Technical Outlook: GBP/USD Eyes 1.3300 Stability

Technically, GBP/USD is hovering just below the 1.3300 mark during European hours. The overall outlook remains constructive, with short-to-long term Exponential Moving Averages (EMAs) continuing to slope upward, signaling ongoing bullish momentum.

The 14-day Relative Strength Index (RSI) has eased to around 63.00 from overbought levels, suggesting a minor correction could be underway. However, this does not signal a trend reversal.

On the upside, the next major resistance lies at the psychological level of 1.3500. On the downside, initial support is seen near the April 3 high around 1.3200, which could provide a firm base if the pair dips further.

In summary, the Pound Sterling is finding temporary support from domestic data, but the overarching narrative continues to favor the US Dollar amid upbeat sentiment on trade and solid US economic data.