- A combination of factors is putting some continuation pressure around GBP / USD on Friday.
- Nervousness around covid-19 and expectations that the Fed will start to downsize soon prop up the USD.
- Disappointing UK retail sales figures weigh on the GBP and contribute to the pair’s selling bias.
The pair GBP/USD maintains its selling tone after disappointing UK macro data release, trading at time of writing close to month-long lows around the 1.3615 region.
The pair has extended the bearish momentum of the previous day and has continued to lose ground during the first half of the trading action on the last day of the week. This marks the second consecutive day of a negative move – also the fourth in the previous five – and is due to a combination of factors.
The persistent nervousness around COVID-19, along with expectations that the Fed will begin to reduce its purchases of assets at the end of this year, has continued to weigh on investor appetite for assets with the highest perceived risk. This, in turn, has benefited the relative safe-haven status of the US dollar and has put some downward pressure on GBP / USD.
The pound sterling has seen further weighed down by weaker-than-expected monthly retail sales figures in the UK, which fell 2.5% in July versus market expectations for a modest 0.4% growth. In addition, sales excluding fuel also fell short of estimates and decreased by 2.4%, while June figures were revised downward.
This occurs as a result of worries that UK job losses will increase after the government aid plan ends in September and the UK’s softer consumer inflation figures on Wednesday. This appears to have dashed hopes of a Bank of England rate hike in the short term and has been seen as a key factor that has weighed on the British pound.
In the absence of big economic releases from the United States, prospects for the Fed to reverse its pandemic-era stimulus favor USD bulls. This, in turn, suggests that the path of least resistance for the GBP / USD pair remains to the downside, ensuring caution before positioning for any recovery.
GBP / USD technical levels
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