Pound US Dollar Exchange Rate Weakens as UK Retail Sales Fall

The Pound US Dollar (GBP/USD) exchange rate has weakened this morning following a fall in retail sales in the UK during May.

At the time of writing the GBP/USD pairing are trending around the $1.3862 level as the US Dollar continues to find support from the recent Federal Reserve interest rate decision.

Pound (GBP) Weakens as UK Retail Sales Disappoint

The Pound has weakened against the US Dollar this morning following the release of the most recent retail sales figures from the UK for May.

Forecasts had expected retail sales to increase 2.1% month-on-month but instead they fell -1.4% as supermarkets suffered following the reopening of restaurants during May.

Jonathan Sparks, CIO, UK and Channel Islands, Private Banking and Wealth Management at HSBC commented on the latest data saying:

‘The broader picture suggests that consumers released pent up demand for the high street in April but then moved on to socialising and eating out in May, as restaurant bookings surged and pubs re-opened.’

‘Even with today’s blip, retail sales are 9% higher than before the Covid pandemic and 15% up from January’s low.’

US Dollar (US Dollar) Supported by Cautious Market Mood

The US Dollar has been edging higher this morning as the currency continues to be supported following the latest Federal Reserve interest rate decision and a cautious market mood.

The stronger US Dollar has been a result of strengthening US treasury yields as the Federal Reserve laid out plans to raise interest rates sooner-than-expected in 2023.

More so, following the announcement the global market mood plummeted as investors headed to the safe-haven US Dollar.

Martin Miller, Market Analyst at Reuters commented on the bullishness of the ‘Greenback’:

‘The dollar jumped on Wednesday after the Fed brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference to the crisis weighing on the economy.’

Pound US Dollar Exchange Rate Outlook: BoE Interest Rate Decision in Focus

Over the weekend the GBP/USD exchange rate will be driven by any coronavirus developments and the market mood, a more upbeat mood would cause the US Dollar to suffer.

Heading into next week, for Pound investors all eyes will be on the latest interest rate decision from the Bank of England (BoE), if the bank continues its hawkish stance the Pound could head higher.

US Dollar traders will look towards the flash Markit PMI figures from the US, whilst not as influential as the ISM PMI’s the data will give an indication into how the US economy has been performing.

Georgina Clissold

Contact Georgina Clissold


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