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GBP/USD exchange rate to weaken following US Retail sales?

Stacks of US Dollar (USD) banknotes.

GBP/USD exchange rate dips amid cooling UK grocery inflation

The pound US dollar (GBP/USD) exchange rate is trending lower this morning following the publication of the UK’s latest grocery inflation data.

At the time of writing the GBP/USD exchange rate is trading at around $1.2755, down roughly 0.2% from this morning’s opening rate.

Retail sales to underpin US dollar (USD)?

The US dollar (USD) is trading sideways against the majority of its peers this morning as US investors  hold off from placing any aggressive bets ahead of the latest US retail sales data scheduled for release later this afternoon.

The data is forecast to report a 0.2% increase in retail sales throughout the month of May, after they stagnated the month before.

Should the data print as expected and confirm a modest rebound in the US retail sector, the ‘Greenbank’ will likely firm against its peers moving into this afternoon’s European session.

A rebound in consumer spending could dimmish current Federal Reserve interest cut bets, as signs of a robust US economy could encourage the Fed to leave rates on hold for longer.

Pound (GBP) to weaken following CPI?

The pound (GBP) is being undermined this morning by the publication of the UK’s latest grocery inflation data just one day before the UK’s latest CPI data is scheduled for release.

Market research firm Kantar found that UK grocery inflation fell for the 16th consecutive month in June, with the figure cooling from 2.4% in May down 2.1% for this reading.

Kantar found that prices are now falling in almost a third of grocery categories, including milk and butter, and cited wet weather as the primary reason for June’s figure.

This has set the stage for the latest domestic inflation data, scheduled for release tomorrow morning.

Headline inflation is expected to have cooled to 2% in May, down from April’s reading of 2.3%, meanwhile core inflation is forecast to cool from 3.9% to 3.5%.

Confirmation that headline inflation has returned to the Bank of England’s (BoE) 2% target, could stoke BoE interest rate cut bets, and may see GBP exchange rates falter in mid-week trade.

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