Pound US Dollar (GBP/USD) exchange rate firms despite falling UK retail sales

Pound US Dollar (GBP/USD) exchange rate ticks upward despite poor retail sales

The Pound US Dollar (GBP/USD) exchange rate is edging higher this morning, despite downbeat UK retail sales data.

At the time of writing, GBP/USD is trading at around US$1.2555, an increase of just under 0.2% from the morning’s opening levels.

Pound (GBP) undermined by falling retail sales

The Pound (GBP) is largely rangebound this morning, despite posting gains against the US Dollar (USD). This is due to downbeat retail sales data from the British Retail Consortium (BRC), which found that sales had slowed notably in January 2024, compared to the previous year.

In January, spending rose by 1.2%, compared to 2023’s rise of 4.2%. With inflation running at roughly 4% in December, the data signifies a clear drop in sales volumes.

Helen Dickinson, Chief Executive of BRC, commented:

‘Easing inflation and weak consumer demand led retail sales growth to slow. While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month.

Larger purchases, such as furniture, household appliances, and electricals, remained weak as the higher cost of living continued into its third year.’

However, this was offset by a bullish start to the European session, which is allowing the increasingly risk-sensitive Pound to remain afloat.

US Dollar (USD) consolidates recent gains amid lack of data

So far this morning, the US Dollar is enduring muted trade amid a cheery market mood. The return of risk-on trade is preventing the safe-haven ‘Greenback’ from resuming its recent upward trajectory.

Furthermore, the lack of market moving data releases may be leading the US Dollar to consolidate those gains against its peers.

Due to hawkish rhetoric from Federal Reserve Chair Jerome Powell, USD has rocketed higher in recent trade. During a speech yesterday, Powell essentially ruled out an interest rate cut in March which served to dismiss existing cut bets.

However, with minimal data to go on this morning, USD is trading sideways against its peers as investors await fresh impetus.

Pound US Dollar exchange rate forecast: central bank speeches in focus

Looking ahead for the Pound, a series of Bank of England (BoE) policymakers are due to deliver remarks. Of specific import are Catherine Mann and Swati Dhingra, both of whom represent opposite sides of the BoE’s current divide.

Mann is likely to advocate for hawkish action, while Dhingra is more likely to ring dovish in her speech. This could further the lack of clarity in the BoE’s recent communication, and weigh on the Pound.

For the US Dollar, Federal Reserve officials are due to deliver speeches over the coming days. If they show a united hawkish consensus, the US Dollar could gain ground against its peers.

Furthermore, the latest initial jobless claims data is due to print on Thursday. Claims are forecast to have fallen to 220,000 during the week ending February 3, which may boost USD by suggesting healthy employment levels.

John Mulcahey

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