GBP/USD hovers above 1.2150 major level, focus on UK employment, PMI data

• GBP/USD struggles to extend gains as US Dollar rebounds.
• UK Retail Sales dipped to 0.9% against the expected 0.1% decline.
• Upbeat US Treasury yields provide support to underpin the Greenback.

GBP/USD struggles to continue the winning streak. trading around 1.2160 during the Asian session on Monday. However, the currency pair encountered a hurdle following the release of downbeat United Kingdom (UK) Retail Sales data for September on Friday. The Pound Sterling (GBP) managed to recover its losses against the weaker US Dollar (USD).

Monthly Retail Sales revealed a 0.9% decline, in contrast to the expected 0.1% decrease, following a modest 0.4% rise in August. On an annual basis, sales contracted by 1.0%, defying market predictions of a stagnant performance.

This dip in Retail Sales is indicative of the financial strain on households due to high inflation and increased borrowing costs. The significant drop in consumer spending is likely to have a notable impact on consumer inflation expectations. As a consequence of weakening spending, there’s speculation that the Bank of England (BoE) might lean towards maintaining the current interest rates at 5.25% in November’s policy meeting.

US Dollar Index (DXY) attempts to recoup recent losses, possibly bolstered by robust economic data from the United States (US). Additionally, the upbeat US Treasury yields provide support in underpinning the US Dollar (USD), with the 10-year US Treasury yield standing at 4.96%, up by 0.92%, by the press time.

Federal Reserve (Fed) Chairman Jerome Powell, on Thursday, suggested that the central bank has no immediate plans to raise rates, providing support for the GBP/USD pair. Powell also mentioned that additional tightening of monetary policy might be necessary if there are further signs of growth or the labor market stops improving.

Atlanta Fed President Raphael Bostic shared his belief on Friday that the US central bank is unlikely to lower interest rates before the middle of next year. Fed Philadelphia President Patrick Harker reiterated his inclination to maintain unchanged interest rates.

Moreover, Fed Cleveland President Loretta Mester indicated that the US central bank is “at or near the peak of the rate hike cycle.” However, Mester acknowledged that the data released during the previous week could influence the central bank’s decision regarding the future of monetary policy.

Market participants will closely monitor the US S&P Global PMI on Tuesday, followed by the Q3 Gross Domestic Product (GDP) on Thursday, and the Core Personal Consumption Expenditures (PCE) on Friday. On the UK docket, Claimant Count Change, Employment Change, and S&P Global/CIPS PMI will also be eyed.