GBP/USD eases below 1.3800 amid steady USD, UK Retail Sales eyed

• GBP/USD pares initial gains on Friday in the Asian trading hours.
• Higher US Treasury yields shield the underperformance of the US dollar.
• Mixed play of US debt deal, Brexit headlines, and critical UK/US data set the tone for the day.

GBP/USD remains muted on the last trading day of the week. The pair remained pressured near 1.3830 as it failed to cross the level for the past few sessions. At the time of writing, GBP/USD is trading at 1.3794, up 0.02% for the day.

The market seems to be  fully discounted the  Bank of England’s (BOE) rate hikes expectations in November. Nick Bennenbroek, International Economist at Wells Fargo said after the initial November hike, there is expectation for another 25bps increase in May, 2022 and a further 25 bps in November 2022, which means ending the BOE’s policy rate cycle ending next year at 0.75%.

The Brexit-led optimism failed to uplift the sentiment surrounding the sterling, following the positive comments from the UK Prime Minister Boris Johnson on the NI protocol.

The greenback managed to hold near 93.70 with minimum losses, tracing the higher US T-bonds yields at 1.68%. The US President Joe Biden remained positive on the passage of the major infrastructure and social spending measures. 

Mixed US data weighs negatively on the US dollar. The Existing Home Sales jumped 6.29 million units in September with a growth of 7% on monthly basis. The Philadelphia Fed Manufacturing Index fell 23.8 in October as compared to 30.7 in September. The US Initial Jobless Claims came lower at 290K below the market expectations of 300K.

As for now, traders keep their focus on the UK Retail Sales, and US Markit Manufacturing Purchasing Managers Index (PMI) data to gauge market sentiment.

GBP/USD additional levels