The Pound US Dollar (GBP/USD) exchange rate has edged higher since markets opened this morning despite a softening in the UK’s economic growth during May.
At the time of writing the GBP/USD pairing are trending around the 1.13779 level as the US Dollar struggles to find any meaningful gains on an absence of economic data from the US.
Pound (GBP) Edges Higher as UK Economic Growth Softens
The Pound has edged higher against the US Dollar this morning as the latest GDP figures from the UK have shown that economic growth missed forecasts of 1.5% during May, instead softening to 0.8%.
Whilst markets had expected a bigger growth in the UK’s economy as harsher lockdown restrictions were eased across the UK during May, a large slowdown in the manufacturing sector along with a pullback in retail sale spending softened the rate of expansion.
Jonathan Gillham, chief economist at PwC commented on the latest UK GDP figures, saying:
‘There are some concerning patterns though – output fell in several manufacturing sectors, microchip shortages disrupted car production, and while consumers spent more time on the high street, overall retail sales were down. Construction numbers fell and so too did components of the financial services sector.’
‘These trends suggest continued consumer caution and that businesses, despite having adapted amazingly well to lockdown conditions in the first quarter, may struggle to fully return capacity to pre-COVID levels.’
Sterling investors also remain cautious surrounding the UK’s proposed lockdown easing on the 19th July as The Independent reports that health services across the UK are already ‘buckling’ under pressure before restrictions have come to an end.
US Dollar (USD) Limited on Lack of Notable Data
The US Dollar has limited against the Pound this morning as a lack of economic data from the US does little to support the ‘Greenback’.
More so, an unexpected rise in initial US jobless claims on Thursday afternoon left investors concerned that the US labour market is far from recovering.
Peter Boockvar, chief investment officer at Bleakley Advisory Group commented on the jobless claim figures saying:
‘While the pace of firings is still above the 200k range we saw pre Covid, it actually is only slightly above the average seen in the expansion in the mid [2000s] where from ’03-’08 it averaged 335k.’
‘Continuing claims continue to fall as about half the states have gotten rid of expanded benefits and there is clearly a large amount of job openings for the taking with companies utilizing more enticements such as hiring bonuses to bring people back.’
The US Dollar could suffer further throughout the day if a speech from ECB President Lagarde took a more hawkish tone surrounding the Eurozone’s economic recovery.
Pound US Dollar Exchange Rate Outlook: Inflation Rate Figures in Focus
Heading into next week, US Dollar investors will look towards US inflation rate figures to be released on Tuesday which could push the ‘Greenback’ higher, though worry markets over rising inflationary pressures.
Whilst Wednesday will see the release of UK inflation rate data, Pound traders will instead focus all their attention to Monday evening, where Prime Minister Boris Johnson’s is expected to make a final decision regarding lockdown easing measures in England.
If the Prime Minister makes a U-turn and delays the 19th July ‘freedom day’ once more then Sterling could suffer major losses at the start of next week.