The GBP/USD price analysis indicates a recovery in the UK economy after a better-than-expected retail sales report. The upbeat report has lowered expectations for BoE rate cuts, boosting the pound. Meanwhile, the dollar was fragile as risk appetite improved on the likelihood of a trade deal between the US and China. 

Data on Friday revealed that UK retail sales jumped by 1.7% in January, well above estimates of 0.4%. The increase indicates solid consumer spending and a rebound in the economy. Recent data has shown an unexpected recovery in the UK economy that has lowered expectations for Bank of England rate cuts this year. As a result, the pound has recovered against the dollar. 

Market participants now expect business activity data for more clues on BoE rate cuts. More upbeat data will push the sterling higher as rate-cut bets drop. On the other hand, a downbeat report would cause a pullback in the currency. 

Further support for the pound came from a weak dollar. The greenback fell on Friday after reports that Trump will soon host China’s president. This suggests a likely trade deal between the two countries, reducing the chances of a trade war.

GBP/USD key events today

• UK flash manufacturing PMI
• UK flash services PMI
• US flash manufacturing PMI
• US flash services PMI

GBP/USD technical price analysis: Bulls approach the 1.618 Fib barrier

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GBP/USD 4-hour chart

On the technical side, the GBP/USD price has risen to make a higher high in the uptrend. This bullish move comes after the price found support at the 30-SMA. Meanwhile, the RSI trades near the overbought region, indicating solid bullish momentum. 

However, the rally is nearing the 1.618 Fib extension level, which might act as a strong resistance. At the same time, the 1.2701 level can create a strong barrier. If bulls show any weakness, GBP/USD might fail to break above this resistance zone. 

On the other hand, if the price maintains its current bias, it will break above this zone to make new highs and continue the bullish trend. The bias will only change when the price breaks below the SMA and the RSI dips below 50.

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