GBP/USD licks wounds below 1.1700 as UK shop price inflation jumps, focus on US ADP, NFP

• GBP/USD picks up bids to print a corrective pullback from 29-month low.
• UK’s BRC shop price inflation increased in July, business confidence hit.
• Political jitters, recession woes weigh on the prices amid broad US dollar strength on hawkish Fed bets.
• US ADP Employment Change can entertain traders ahead of Friday’s US NFP.

GBP/USD renews intraday high near 1.1670 as it consolidates the weekly losses around the lowest levels since March 2020 during Wednesday’s Asian session. In doing so, the cable pair takes clues from the recently firmer UK data, as well as a pullback in the US dollar ahead of the ADP Employment Change release.

That said, Reuters quoted the British Retail Consortium (BRC) data while stating that shops and supermarkets in Britain increased prices by 5.1% in the 12 months to August, the largest rise in records dating back to 2005, reflecting a jump in food costs caused by the war in Ukraine.

Additionally, UK PM Boris Johnson’s readiness for signing off on the £30 billion Sizewell C nuclear power station, per the UK Times, also seemed to have favored the GBP/USD pair’s latest rebound.

However, Lloyds Bank released the latest survey results while saying, “Confidence among British businesses has sunk to its lowest since March 2021 as companies worry about fast-rising inflation.” The details also mentioned that the pay pressures stabilized after a recent rise.

It should be noted that the Financial Times (FT) quoted Rishi Sunak, Tory leadership contender, as he warned that it would be “complacent and irresponsible” to ignore the risk of markets losing the faith in the UK economy.

On the other hand, firmer US data allowed the Fed policymakers to sound hawkish and renew the US dollar buying before the latest retreat. the US Consumer Confidence for August improved to 103.2 versus 95.3 in July, per the Conference Board’s (CB) latest survey details. Also, US Housing Price Index (HPI) rose by 0.1% MoM in June compared to May's increase of 1.3% and market expectation of 1.1%. Further, the S&P/Case-Shiller Home Price Indices eased to 18.6% YoY during the stated month versus 19.5% forecast and 20.5% previous readings. It should be noted that the US JOLTS Job Openings grew to 11.239M in July versus 10.475M expected and 11.04M prior (revised from 10.698M).

Following the data, Richmond Federal Reserve Bank President Thomas Barkin said, "I don't expect inflation to come down predictably." On the same line was Atlanta Fed President Raphael Bostic who said, “Slowing inflation data 'may give us reason' to slow interest rate hikes.” Recently, New York Fed President John Williams said, per the WSJ, “We are not at restrictive policy yet.” The policymaker also added, “We need to get interest rates higher than longer run a neutral level.”

Amid these plays, the US 10-year Treasury yields rose to the highest levels in two months and Wall Street closed in the red. However, the S&P 500 Futures print mild gains by the press time.

Given the corrective pullback in the market, GBP/USD may extend its recovery but the risk catalysts the US ADP Employment Change for August, the early signal for Friday’s US Nonfarm Payrolls (NFP), expected 200K versus 128K prior, will be important to watch for fresh impulse.

Technical analysis

A clear U-turn from July’s low of 1.1760 keeps GBP/USD bears hopeful of refreshing the multi-month low.