- The GBP/USD price analysis points to a bullish scenario, as UK retail sales surprise markets with an upbeat number.
- The US dollar could not gain traction despite better Q3 GDP and sustained Core PCE figures.
- The markets now await UK PMI data in the next two hours, followed by US PMIs in the New York session.
GBP/USD is supported ahead of the UK flash PMI, after UK Retail Sales delivered a broad upside surprise that challenges the recent “UK demand is rolling over” narrative. December headline retail sales rose 0.4% MoM after a 0.1% fall in November, against expectations for another 0.1% decline.
More importantly, the core measure excluding auto fuel also improved, up 0.3% after a revised 0.4% drop previously, versus forecasts for a 0.2% fall. The annual numbers were stronger too, with headline sales up 2.5% and core up 3.1%, both comfortably above consensus.
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Taken together, the report points to stronger underlying resilience in consumer spending than markets had priced, which matters because consumption is one of the clearer ways the UK can offset weakness elsewhere.
That said, Retail Sales are backwards-looking, and today’s PMI is the forward-looking check on whether momentum is carrying into the New Year. The markets will pay less attention to the headline PMI level and more to the direction, the strength of services, and whether companies are seeing stronger demand or remain cautious.
A stronger services PMI would align with the Retail Sales beat and counter fears of a near-term recession. This could keep the pound strong even if market participants expect the Bank of England to ease gradually. If the PMI is weak, the stagnation story could start up again quickly. Strong spending in December could be seen as seasonal volatility instead of a trend, and expectations for rate cuts could pick up again.
On the US side, Thursday’s data were solid and should, in theory, temper aggressive USD bearishness. The annualized GDP came in at 4.4% in Q3 2025, and core PCE inflation rose to 2.8% YoY (0.2% MoM). Even with that, the dollar hasn’t regained a clear direction as markets still expect the Fed to hold next week but anticipate cuts later in the year.
The GBP/USD near-term direction is likely to hinge on whether UK PMI confirms that the Retail Sales strength was a signal, not noise, with volatility risk elevated around the release. Markets also await US PMI data in the New York session, which could significantly impact the pair’s directional bias.
GBP/USD Technical Price Analysis: Buyers’ Dominance Near 1.3500
The GBP/USD price broke above the key MAs and the 1.3490 resistance to briefly jump above the 1.3500 handle before easing slightly. The RSI remains flat near 60.0, indicating a slowing bullish momentum but with room for further gains. The 20- and 100-period MA crossover also points to further gains. Finding acceptance above the 1.3500 level could push prices to 1.3560, ahead of 1.3600.
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On the flip side, any downside move could find tough support near the 20- and 100-period MA confluence near 1.3450. Failing to hold the level could ignite further selling towards the 1.3400 handle.
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