Pound US dollar (GBP/USD) fluctuates amid UK retail concerns
The pound US dollar (GBP/USD) exchange rate is struggling to gain ground this morning amid worse-than-forecast British retail activity and a mixed market mood.
At the time of writing the GBP/USD exchange rate is trading at around $1.2093, virtually unchanged from this morning’s opening rate.
Pound (GBP) falters amid weak retail activity
The pound (GBP) is facing headwinds this morning following a larger-than-forecast contraction in UK retail activity.
British retail sales fell to a four-month low in April, contracting by a weighty 2.4%, rather than the more modest 0.2% fall, forecast by economists.
Signs of continually weak consumer activity indicate that persistently high price pressures continue to weigh on the average British consumer, ultimately hampering GBP exchange rates this morning.
Paul Nowak, General Secretary at TUC, said:
‘We need people to be able to spend in their local economies to boost growth and businesses. That’s the only way we’ll be able to achieve a sustainable recovery.
But today’s slump in retail sales shows that families are still struggling with the cost of living crisis – with millions having to cut back.’
Despite recently improving growth projections for the year ahead, the disappointing slump in retail sales serves to reinforce a sense of UK economic pessimism this morning, leaving Sterling on the back foot.
US dollar (USD) buoyed by hawkish Fed minutes
The US dollar (USD) is on the defensive this morning amid a lack of macroeconomic releases so far today.
In the absence of fresh US releases, yesterday’s upbeat PMIs and robust employment data serve to keep USD afloat.
In addition to this, continually hawkish Federal Reserve commentary cushions USD’s potential downside as policymakers push back against imminent monetary unwinding.
Speaking at the South African Reserve Bank’s Biennial Conference in the Cape Town International Convention Centre, Fed Raphael Bostic said:
‘We’re not past the worry point in terms of inflation getting back to our target. That could spur a sort of resurgence, if you will, of economic activity that might be counterproductive to what we’re trying to accomplish.
I have really actually taken that on board … and it might be that we have to be a little more patient and be more certain that inflation is on its way” to the Fed’s 2% goal before cutting interest rates.’
Meanwhile, a cautiously upbeat market sentiment appears to ultimately stymie the safe-haven currency, with investors opting for its more risk-sensitive counterparts.
Pound US dollar exchange rate forecast: US durable goods orders to sink the ‘greenback’?
Looking ahead, the latest durable goods orders in the US are due out this afternoon. New orders for manufactured durable goods in the United States are set to fall in April by 0.8%, following the previous month’s 2.6% surge. Should the data print as forecast, decreased domestic demand could see USD falter.
A lack of further UK releases today will likely place GBP as a less favourable investment option, as markets digest this morning’s significant retail slump.