Pound Sterling US Dollar (GBP/USD) Exchange Rate Muted as US Retail Sales Jump
UPDATE: The Pound Sterling US Dollar (GBP/USD) exchange rate remained flat this afternoon. This left the pairing trading at around $1.2604.
The US Dollar remained rangebound after data showed US retail sales increased more than expected in June.
However, the risk-on mood continued due to the resurgence in coronavirus cases and high levels of unemployment.
With 32 million Americans on unemployment benefits and with initial claims rising by 1.3 million during the week of 11 July, investors were wary.
Commenting on the data, Michael Gapen, chief U.S. economist at Barclays Plc noted:
‘The jobless claims data suggests that further gains from here will be much harder to achieve.
‘The retail sales data tell us something about how households emerged from lockdown between mid-May and the end of June, but the jobless claims data are telling us something about their ability to carry that forward into July and August against a backdrop where it’s unclear whether additional federal benefits payments are forthcoming.’
Pound Sterling US Dollar (GBP/USD) Exchange Rate on Signs of British Labour Market Weakness
The Pound Sterling US Dollar (GBP/USD) exchange rate edged around -0.4% lower. This left the pairing trading at around $1.2537.
The Pound struggled on Thursday after the latest employment data showed the decline in the labour market slowed last month.
However, the latest data did not include the recent slew of job losses caused by the coronavirus crisis.
Early indicators showed the number of employees on payrolls was down by around 649,000 between April and June.
The country’s employment rate held steady at 3.9% between March and May. This was much higher than economists’ forecasts of a jump to 4.2%.
Although, an official from the Office for National Statistics (ONS) said the unemployment rate is being held down. Around half a million people who are away from work, receiving no pay but believe they still had a job.
The pairing slumped this morning as Britain’s labour market showed further signs of weakness as job vacancies slumped.
In the three months to June, vacancies slumped to the lowest level since the series began in 2001. This was around 23% lower than the previous record hit in 2009, and sent GBP lower.
US Dollar (USD) Gains as US-China Tensions Back in Focus
The US Dollar was able to gain support on Thursday morning as US-China tensions and dire Chinese data weighed on expectations for a swift economic rebound after the coronavirus crisis.
Data from China showed that while Q2 GDP jumped 3.2%, a larger than expected fall in retail sales dampened risk appetite.
The unexpected fall in sales for the fifth month in a row was an unwelcome sign of potential problems ahead for the rest of the world as countries continue to relax lockdown measures.
According to Rodrigo Catril, National Australia Bank’s FX analyst:
‘While in general it’s fair to say that the numbers beat expectations, what the numbers also reveal is that we’re seeing that the China consumer remains behind.
‘That cautiousness is something the market is looking at in terms of countries where the consumer plays a bigger role, so that’s obviously relevant for the US as well.’
The US Dollar was also supported as coronavirus cases in the world’s largest economy continued to rise.
US-China tensions also remained in focus as a White House spokesman noted President Donald Trump had not ruled out additional sanctions on Chinese officials.
Pound US Dollar Outlook: US Retail Sales and Initial Jobless Claims in Focus
Looking ahead, the US Dollar (USD) could edge higher against the Pound (GBP) following the release of the latest US retail sales data.
If sales do not rise as high as expected in June, it will weigh on sentiment and send traders flocking to the safe-haven ‘Greenback’.
Added to this, traders will also be focused on the latest US initial jobless claims data which are expected to show unprecedentedly high levels of Americans applying for unemployment benefits.
Meanwhile, Friday could see the Pound claw back some losses following the release of the latest consumer confidence data.
If flash confidence rises higher than expected in July it will boost GBP. This will leave the Pound US Dollar (GBP/USD) exchange rate largely flat on Friday morning.