The British Pound (GBP) advanced, showing some strength in the foreign exchange markets despite a considerable fall in UK Retail Sales for May 2025. The GBP/USD pair traded solidly around 1.3500, while investor sentiment remained buoyant given the dovish signals from the Bank of England (BoE) and declining geopolitical risks giving support to the GBP.
UK Retail Sales Show Biggest Monthly Decline Since December 2023
The UK’s Office for National Statistics (ONS) reported that Retail Sales fell by 2.7% month-on-month in May, marking the sharpest drop in consumer spending since late 2023. On a year-over-year basis, sales were down by 1.3%, defying forecasts of a 1.7% increase. Major contributors to the decline were department stores and clothing retailers, signaling weakening consumer demand.
Despite the bleak data, the British Pound strengthened, indicating that traders have priced in the negative figures and are now focused on forward-looking indicators.
BoE Holds Rates Steady, Maintains Gradual Easing Stance
The BoE has voted to hold the official rate steady at 4.25% with a vote of 6-3. The three who voted to cut the rate referred to “material loser labor market conditions”.
Andrew Bailey, the Governor of the BoE, reinforced the Bank’s desire to adopt a ‘gradual and careful’ monetary easing strategy. He also commented on how rising energy prices of the Middle Eastern conflict and softer job market data illustrate key risks to the UK’s outlook.
Middle East Geopolitical Tensions Easing, Supporting Risk Sentiment
The recent comments from the White House clarifying that the United States is not considering action against Iran in the near term reduced geopolitical risk. This increase in risk appetite, which has further decreased demand for safe-haven assets such as the US Dollar, has indirectly supported the Pound.
GBP/USD Eyes 1.3500 Resistance
At present, the GBP/USD pair trades near a psychological barrier of 1.35000 and is close to the 20-day EMA. The relative strength index, or RSI, is indicating a gauge of 50.00, so it appears that the currency is consolidating in the short term.
Key resistance is at 1.3630, the three-year high, and immediate support is at 1.3250 (the low from May 16). A breakout above 1.3500 would indicate a possible reversal from the recent downtrend, which would lead to further gains.
Conclusion
The Pound Sterling has remained stable despite negative Retail Sales data, buoyed by reduced geopolitical tensions and a cautious BoE stance on policy. The forthcoming PMI data will be likely decisive for whether GBP/USD retains its upward momentum or faces renewed challenges from weak domestic fundamentals.
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