- GBP / USD halted this week’s good rally from the lowest level since February.
- Brexit, COVID-19 nervousness and mixed UK retail sales act as a headwind for the British pound.
- A modest dollar strength contributes to the pair’s selling bias.
The pair GBP/USD remains defensive after UK macro data release, trading near daily lows below the 1.3750 level.
The pair has struggled to capitalize on this week’s strong recovery move from levels below 1.3600, the lowest level since early February, and has moved lower during Thursday’s session. GBP / USD has had a rather muted reaction to UK macro data, which showed that top retail sales grew 0.5% in June compared to 0.4% expected and from the previous -1.3%. In annualized terms, UK retail sales increased 9.7% in June versus 9.6% expected.
However, these data have been seen offset by a slight disappointment in underlying sales, which registered a modest growth of 0.3% during the reported month compared to the 0.6% expected. In addition, the annual rate also fell below expectations and increased by 7.4%.
In addition, the seasonally adjusted IHS Markit / CIPS Manufacturing Purchasing Managers Index falls to 60.4 points in July from 62.5 expected., while the preliminary services business activity index for July fell to 57.8 from the final June reading of 62.4.
This occurs following the rise in COVID-19 infections in the UK, which together with the impasse on the Northern Ireland Protocol to the Brexit agreement have acted as a headwind for the British pound.
On the other hand, concerns that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery has offered some support to the safe-haven US dollar. Apart from this, a good rally in US Treasury yields has further supported the USD, which in turn has put some pressure on the GBP / USD pair. Investors are now looking forward to the release of the US PMI for a significant boost.
Technical levels to observe
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