Pound US Dollar Exchange Rate Muted on Weak UK Data
The Pound US Dollar (GBP/USD) exchange rate is trading in a narrowband today as UK retail sales printed poorly and Boris Johnson suffers another political setback.
At time of writing the GBP/USD exchange rate is trading around $1.227, relatively unchanged from this morning.
Pound (GBP) Trades Sideways as Retail Sales Slump
The Pound (GBP) is trading listlessly today after retail sales were shown to have contracted by 0.5% May. Despite beating forecasts of an 0.7% drop, the slump in retail sales continues to highlight the worsening cost-of-living crisis gripping the UK.
The biggest slump in sales came in food stores which saw a drop of 1.6%, as the impact of rising food prices continue to weigh on the consumer. Looking at the three months up to May, retail sales have dropped by a significant 1.3%.
Elsewhere, the Pound continues to be subjected to political instability as Prime Minster Boris Johnson suffered another defeat as the Conservative party lost two key seats in yesterday’s byelections. Labour won Wakefield, whilst Lib Dems wrestled Tiverton and Honiton from the Tories.
On the back of surrendering two more Tory seats, further pressure has been piled on Johnson’s leadership as Conservative chair Olive Dowden has resigned in the face of the disastrous double byelection blow.
Fresh uncertainty for Boris Johnson and his grip on the premiership doesn’t bode well for the Pound. The continued political uncertainty could weigh on Sterling as Johnson’s days appear numbered.
US Dollar (USD) Wavers after Powell’s Speech Fails to Lift Mood
The US Dollar (USD) is trading narrowly against most of its peers today as investors continue to ponder the central bank’s inflation combating strategies amid growing recession fears.
Testifying before the House Financial Services Committee yesterday, Federal Open Market Committee (FOMC) Chairman Jerome Powell reiterated the Fed’s hard-line stance on fighting inflation but conceded that a recession is possible.
However, Powell is still confident in fairly strong economic growth this year as he expects to bring inflation down to the Fed’s target of 2%.
Growing concerns of recession and a myriad of downbeat US data has softened the demand for the US Dollar today but could in fact benefit it in the coming weeks. Continuing risk-averse markets could attract investors to safe-haven currencies, such as the ‘Greenback’.
Pound US Dollar Forecast: BoE Speech to Inspire the Pound?
Looking ahead, major data is thin on the ground for the Pound US Dollar pairing but a speech from BoE MPC member Jonathan Haskel could give further indication as to how the BoE intends to combat inflation. Hawkish comments could buoy the Pound heading into the weekend.
Elsewhere, amid heightening fears of a global recession, the continuing risk-off mood could sway investors towards safe-haven currencies, providing a needed boost to the US Dollar.