Pound US dollar (GBP/USD) exchange rate trades near three-week high
The pound US dollar (GBP/USD) exchange rate is drifting higher this morning following the publication of some upbeat UK retail sales data.
At the time of writing, GBP/USD is trading at around $1.2887, up roughly 0.2% from this morning’s opening levels.
Pound (GBP) underpinned by domestic retail sales
The pound (GBP) is being marginally supported this morning by the publication of the UK’s latest retail sales report, which has seen Sterling remain above ground against the majority of its peers.
The latest month-on-month figure reported a solid rebound July and rose from a previous reading of -0.9% to 0.5%, printing in line with market expectations.
The return to growth in the UK’s retail sector has served to undermine current Bank of England (BoE) interest rate cut bets, lifting Sterling sentiment in the process.
Neil Birrell, Chief Investment Officer at Premier Miton Investor commented:
‘There is little doubt that the UK economy is moving along nicely with virtually all indicators pointing in the right direction, with sales volumes now virtually back to pre-COVID pandemic levels. The stability of the economy must be making the UK look like an attractive place for international investors.’
US dollar (USD) remains hobbled by risk-on mood
The US dollar (USD) is struggling to garner investor attention this morning, once again hobbled by an increase in market appetite for risk.
As an acutely safe-haven currency, this week’s upbeat trading conditions have dampened USD sentiment through to the end of the week.
USD investors may also be reluctant to place any aggressive bets ahead of some high impact domestic data, scheduled for release later today.
The data will come in the form of the latest Michigan consumer sentiment index, and could infuse significant volatility into USD exchange rates in the second half of today’s European session.
GBP/USD exchange rate forecast: US sentiment index to drive movement
Looking ahead, the primary catalyst of movement for the pound US dollar exchange rate this afternoon will likely be the publication of the US Michigan consumer sentiment report for August.
The index is forecast to rise from a previous reading of 66.4 up to 66.9 and could offer the ‘greenback’ some marginal support this afternoon, should the data mirror expectations.
However, should the data report an unexpected decline in consumer morale, this could ramp up current speculation that the Federal Reserve could cut rates by 50 basis-points in September, and in turn see USD slump against its peers.
Turning to the pound, UK economic data will remain scarce for the remainder of the day and moving into the start of next week’s trading session.
This will likely see GBP exchange rates driven primarily by risk appetite, and could see Sterling remain on the front foot should this week’s positive market mood prevail.