GBP/USD Exchange Rate Weakens amid UK Slowdown Concerns
The Pound US Dollar (GBP/USD) exchange rate is losing ground today as the latest UK’s retail data gives rise to renewed fears about the country’s economic health.
At the time of writing the GBP/USD exchange rate is trading at around $1.2664, down approximately 0.3% from this morning’s opening rate.
Pound (GBP) Dented by Weak Retail Data
The Pound (GBP) fell today as weaker-than-expected retail sales in December reinforced concerns that the UK may have fallen into recession in the final quarter of last year. Retail sales reportedly fell by 3.2%, significantly missing forecasts of a 0.5% contraction.
Looking ahead, UK data will be thin on the ground throughout the beginning of next week. This may leave Sterling vulnerable to shifts in risk appetite for much of Monday and Tuesday’s sessions. A continuation of today’s cheery trade may offer the increasingly risk-sensitive Pound some support amid a lack of data.
The latest PMI reports are then due for release on Wednesday and are likely to drive significant GBP volatility. Preliminary readings for both the services and manufacturing sector may lift the Pound, with expectations of a marginal uptick within each report.
The latest services index is expected to remain safely in growth territory, edging higher to 53.5, which may boost GBP amid signs of continual growth in the UK’s vital services sector.
Manufacturing is also due to edge higher to 46.7, though stagnancy in contraction territory may serve to somewhat limit Sterling’s gains.
January’s CBI distributive trade data is then due out on Thursday of next week. This low-impact data release could marginally lift the Pound, with a notable increase from December’s reading of -36, to -18 expected.
US Dollar (USD) Slumps amid Upbeat Trade
The US Dollar (USD) wavered today amid a spell of cheery trade.
However, a slight uptick in January’s consumer sentiment indicator cushioned USD’s losses, as growing optimism pointed to economic resilience in the US.
Coming up, speeches from Federal Reserve policymakers Michael Barr and Mary Daly may drive USD volatility this evening. While upbeat data in recent days has forced markets to resize their expectations of a March interest rate cut, supporting commentary from Fed policymakers could strengthen the ‘Greenback’.
Looking further ahead, much like its UK counterpart, preliminary PMI readings may be a core catalyst of USD movement on Wednesday next week, with data in short supply in the interim.
Economists expect to see contractions in both the services and manufacturing sector in January, which may cause investor interest in the ‘Greenback’ to dwindle.