GBP/USD Sinks as UK Growth Contracts in Second Quarter

Last week’s high: $1.2204

Last week’s low: $1.2062

US Dollar Fluctuates on US-China Trade Tensions

Trade tensions between the US and China saw the Pound edge higher against the US Dollar at the start of last week.

The US ISM Non-Manufacturing PMI also eased below forecasts, sinking from 55.1 to 53.7.

However, by midweek a mixture of no-deal Brexit fears and a breakdown of negotiations between the UK and EU over the controversial Irish backstop saw the Pound struggling.

Sterling sank further on Friday following the publication of the UK growth figure for the second quarter. This contracted to a worse-than-expected -0.2% – its worst performance in six and a half years.

Sajid Javid, the Chancellor of the Exchequer, attempted to quell fears for an imminent UK recession:

‘There’s not a single leading forecaster out there that is expecting a recession, the independent Bank of England is not expecting a recession. And that’s because they know that the fundamentals remain strong.’

USD Outlook: US Retail Sales Ahead

Pound traders will be anticipating today’s publication of the UK ILO unemployment rate figure, expected to hold at 3.8%.

Meanwhile, the US Dollar could lose gains against the Pound if US inflation data shows signs of decreasing in July.

Tuesday will also see the publication of the UK Consumer Price Index, which is expected to remain at 2%.

US and UK retail sales figures will be in focus on Thursday.

The ‘Greenback’ could weaken by the end of the week if the flash US Michigan Consumer Sentiment Index for August confirms consensus and eases from 98.4 to 97.7.

The GBP/USD exchange rate is likely to remain volatile as Brexit uncertainty seems likely to rise and UK-EU negotiations show no signs of improvement.

Key Events

12th August

19:00 US Monthly Budget Statement (Jul)

13th August

09:30 UK ILO Unemployment Rate (Jun)

09:30 UK Average Earnings Excluding Bonus (Jun)

13:30 US Consumer Price Index (Jul)

14th August

09:30 UK Retail Price Index (Jul)

09:30 UK Consumer Price Index Jul (Jul)

15th August

09:30 UK Retail Sales (Jul)

13:30 US Retail Sales Control Group (Jul)

16th August

13:30 US Housing Starts (Jul)

15:00 US Michigan Consumer Sentiment Index (Aug)