• Sales volume in the UK in January rose 1.9% better than the forecast and the prior data, favoring the pound.
• The recent headline “President Biden has “agreed in principle” to meet the Russian leader if there is no invasion” has improved Market sentiment.
• Central Bank speeches remain on traders radars, with rate hike expectation from BoE.

The British sterling is trading higher at the start of the week. Pound gained strength amidst upbeat UK Retail Sales data, expectations of rate hikes from the Bank of England and risk on mood by Russian diplomacy.

Sales volumes in the UK in January rose 1.9%, exceeding the forecast a 1.0% rise, as consumers began to return to more normal buying behaviors after a 4% drop in December 2021. This upbeat data favored the pound on the basis that the Bank of England would be expected to hike rates in March following hotter Inflation data published last week showing inflation rising to a nearly 30-year high.

Optimism over Russian diplomacy also favors the pound.  Joe Biden and Putin have accepted “the principle” of a summit over Ukraine.  The caveat to such a meeting is that it will only take place so long that there is no invasion of Ukraine. However, No date has been confirmed with Putin so far, the White House spokesman said.

Biden stepped up his warnings about Moscow’s plans on the weekend after he saw evidence that an attack on Ukraine was imminent. Officials say Satellite images show a new phase of Russian military readiness and the US has intelligence that the Kremlin ordered an invasion prompted the latest Biden warning. Also, the US is prepared to impose swift and severe consequences if Russia invades, adding that Russia appears to continue preparations for a full-scale assault on Ukraine very soon.

On the other hand, Russia’s first deputy permanent representative to the United Nations Dmitry Polyanskiy said on Sunday that The assessments of U.S. and British spies on Ukraine cannot be trusted. He said “We don’t trust the U.S. and British intelligence, they let us down, the whole world, on many occasions enough to remember weapons of mass destruction in Iraq.”

Traders await central banks speeches due this week. Bank of England (BOE) Governor Andrew Bailey will appear before the Treasury Committee on Wednesday. Several U.S. Federal Reserve policymakers will also speak throughout the week, and investors looking for clues that a large 50 basis point rate hike could come at the Fed’s March 2022 meeting, instead of the more widely expected 25 basis point increase.

Meanwhile, The BOE is also widely expected to hike rates again at its March meeting which favors the pound.

GBP/USD 4 Hour Chart:

Support: 1.3559 (S1), 1.3531 (S2), 1.3490 (S3).

Resistance: 1.3629 (R1), 1.3670 (R2), 1.3698 (R3).

The upbeat UK retail data, Rate hike expectation from BoE and Optimism over Russian diplomacy favors the sterling. We expect a bullish trend for GBP/USD.