GBP/USD Exchange Rate Subdued as Upbeat UK Retail Data Fails to Inspire Sterling
The Pound Sterling to US Dollar (GBP/USD) exchange rate is retreating this morning as some impressive UK retail sales figures fail to inspire Sterling sentiment.
At the time of writing the GBP/USD exchange rate is trading at around $1.2879, down roughly 0.3% from this morning’s opening levels and leaving the pairing trading at a one-week low.
Pound (GBP) Muted in spite of Impressive Retail Sales
The Pound (GBP) is struggling to find momentum against the US Dollar (USD) and the majority of its other peers this morning despite UK retail sales printing above expectations in January.
According to data published by the Office for National Statistics (ONS), UK sales growth shot up by 0.9% last month, a sharp rebound from the 0.5% contraction recorded in December.
This was the first increase in sales growth since July and also saw retail sales climb to a 10-month high.
UK retail sales rebound after longest contraction on record https://t.co/7Vm5VHkAfh
— FT Breaking News (@ftbreakingnews) February 20, 2020
The uptick in sales growth appears to confirm the existence of the ‘Boris bounce’, with the Conservatives’ decisive victory in December’s general election ease political uncertainty and bolstering consumer confidence.
However Sterling has failed to capitalise on the bounce, partly due to warnings from analysts that the sales still remain relatively weak, with the quarter figures showing that sales growth contracted by 0.8% in the three-months to January.
On top of this lingering Brexit uncertainty also seems to be taking its toll on the Pound this morning, as markets fear clashes between the UK and EU when trade negotiations get underway next month.
US Dollar (USD) Supported by Risk-Off Trade
At the same time, the US Dollar (USD) remains in demand this morning as a risk-off mood in markets funnels investors towards the safe-haven currency.
This comes in the wake of the People’s Bank of China (PBoC) move to cut interest rates as China attempts to cushion the economic impact of the coronavirus outbreak.
Concerns over the coronavirus and its potential impact on the global economy also continue to limit market risk appetite, further driving demand for safe-haven assets.
Meanwhile in the US, the publication of the minutes from the Federal Reserve’s latest policy meeting were also supportive of the US Dollar, as policymakers see the bank’s current monetary policy as appropriate.
GBP/USD Exchange Rate Forecast: Robust UK PMI Figures to Cheer Sterling?
Still to come this week, we have the publication of the UK’s flash PMI figures for February.
Their release could help the Pound to US Dollar (GBP/USD) exchange rate to rally on Friday should growth in the UK’s private sector be shown to have sustained its post-election bounce.
A positive reading will bolster hopes the UK economy will have returned to growth at the start of 2020 and ease pressure on the Bank of England to ease monetary policy in the near-term.
In the meantime, the US Dollar could come under some modest pressure later this afternoon with the publication of the Philadelphia manufacturing index, which is expected to reveal a slowing of factory activity this month.