The GBP/USD forecast leans bearish, with the pound hovering near Friday’s lows due to a disappointing UK retail sales report. Meanwhile, the dollar inched lower after US President Joe Biden announced on Sunday that he was dropping his re-election bid.

The pound dropped on Friday after the UK released data showing sales fell by 1.2%, well above the expected drop of 0.4%. This was a significant decline from May, when sales rose 2.9%. Experts believe this decline came from cooler weather during the month, discouraging buyers from shopping.

However, the outlook for Bank of England rate cuts remained mostly unchanged. Markets have lowered the chances of a cut in August due to still-high service inflation. Consequently, the BoE might still be among the last major central banks to cut rates. 

Meanwhile, the dollar fell slightly as markets absorbed the latest development in the US presidential race. Joe Biden announced on Sunday that he was no longer running for the seat. 

At the same time, investors focused on the outlook for Fed rate cuts after fully pricing in a rate cut in September. There is a slight chance the Fed will cut in July. The next major report is the core PCE price index, which will come on Friday. This will give further insight into the state of inflation.

GBP/USD key events today

The pair will start the week slowly, as no key reports will come on Monday or Tuesday.

GBP/USD technical forecast: Bears halt at 1.2900 support

(Click on image to enlarge)

GBP/USD 4-hour chart

On the technical side, the GBP/USD price has paused near the 1.2900 key support level after breaking below the 30-SMA. With the price now under the SMA, the bias is bearish. Furthermore, the RSI trades below 50 in bearish territory. 

The reversal came after bullish momentum faded near the 1.3050 resistance level. Bears then took charge by pushing the price below the SMA. However, GBP/USD must start making lower highs and lows to confirm a bearish trend. The next move might be to the 30-SMA resistance. If it holds firm, the price could break below 1.2900 to retest the 1.2800 support.

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