GBP/USD Exchange Rate Falls as UK Economic Outlook Grows Darker on Brexit Uncertainty
The Pound to US Dollar (GBP/USD) exchange rate dipped this morning, with the pairing currently fluctuating around $1.25.
Sterling struggled today after it was reported that footfall on UK high streets had slumped by 65% in June compared with 2019, according to the data company Springboard. As a result, GBP has suffered as Covid-19 still holds back the British retail sector despite the widescale reopening of shops.
Diane Wehrle, the insights director at Springboard, commented:
‘This is concerning for the economic recovery path of bricks-and-mortar retail who are heavily reliant on customer experience.’
GBP investors are concerned about the UK’s economic recovery as Brexit continues to haunt British markets. This follows news that many businesses are unprepared for a full Brexit which is due to go ahead in just five months’ time.
The Institute of Directors (IoD) said that their recent poll of 1,000 company directors revealed a majority of 69% in favour of a trade deal rather than crashing out on World Trade Organization (WTO) terms.
Today will also see the Bank of England’s (BoE) Governor Andrew Bailey deliver a speech. If he is notably downbeat about the British economy’s ability to recover, then we could see Sterling fall.
In UK economic news, today will see the release of the UK BRC Like-For-Like Retail Sales figures for June. Any signs of improvement for the British retail sector would prove GBP-positive.
US Dollar (USD) Edges Higher Despite Improving Risk Sentiment
The US Dollar (USD) edged higher against the Pound (GBP) today despite improving risk-sentiment on hopes of a possible vaccine for the coronavirus. As a result, this has buoyed hopes that the global economy could effectively be fast-tracked towards recovery.
As a result, the safe-haven ‘Greenback’ has suffered as investors seek out riskier assets.
David Madden, CMC Markets
However, after US coronavirus cases surged over the weekend – with Florida recording an increase of more than 15,000 in just 24 hours – doubts have begun to grow over the world’s largest economy.
Yukio Ishizuki, senior analyst at Daiwa Securities, commented:
‘Rising coronavirus cases are not positive but at the moment, markets seem to think that there is still some distance to a situation where an overflow of the medical system will force them to put restrictions on the economy.’
GBP/USD Outlook: Could Improving Risk Sentiment Drag Down the ‘Greenback’?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK’s Manufacturing and Industrial Production figures for May. If these improve, then we could see the GPB/USD exchange rate edge higher.
Tomorrow will also see the release of May’s UK GDP figures for May. Any improvement in the UK’s growth figure would prove GBP-positive.
USD investors will be looking ahead to tomorrow’s release of the latest US Consumer Price Index report for June. If US inflation rose last month, then we could see the ‘Greenback’ suffer as investors seek out riskier assets.
The GBP/USD exchange rate will remain sensitive to risk-sentiment this week. Any signs of improvement in market mood would drag down the US Dollar.
Comments are closed.