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Pound US Dollar (GBP/USD) Exchange Rate Momentum Limited Thanks to UK Retail Sales Decline

November 14, 2019 - Written by Frank Davies

Underwhelming UK Retail Data Limits Pound Sterling US Dollar (GBP/USD) Exchange Rate Upside

October’s UK retail sales data failed to impress investors, leaving the Pound Sterling to US Dollar (GBP/USD) exchange rate on a weaker footing.

As sales excluding auto fuel unexpectedly contracted -0.2% on the month this undermined confidence in the resilience of the UK economy.

With consumers showing less appetite for spending, potentially in response to escalating political anxiety, the risks of a weaker fourth quarter gross domestic product increased.

As stronger levels of consumer spending had helped to shore up the UK economy in previous quarters this disappointing decline prompted the Pound to stumble against its rivals.

US Labour Market’s Struggle to Tighten Weighs on US Dollar Demand

A surprise uptick in the latest US initial jobless claims figure saw the US Dollar soften, however.

With the US labour market struggling to tighten further investors still see a risk of the Federal Reserve cutting interest rates again in the coming months.

Although October’s producer price index data showed a solid rebound on the month this was not enough to drive the GBP/USD exchange rate lower.

Lingering worries over the likelihood of imminent progress towards a US-China trade deal helped to limit the downside potential of the US Dollar over the course of trade on Thursday, however.

Rebound in US Retail Sales Forecast to Shore up USD Exchange Rates

Demand for the US Dollar may pick up ahead of the weekend, though, as forecasts point towards a solid rebound in October’s advance retail sales data.

After the -0.3% monthly decline seen in September investors are hoping for evidence that consumer confidence recovered at the start of the fourth quarter.

However, even a strong improvement here could easily be overshadowed if the latest raft of US manufacturing and production figures fail to impress.

Fresh evidence that the world’s largest economy is suffering from an industrial slowdown, exacerbated by ongoing trade tensions, would leave USD exchange rates exposed to renewed selling pressure.

Pound Looks for Fresh Rally on Improved Industrial Trends Orders Index

GBP exchange rates may struggle to find additional support in the near future as uncertainty over the UK’s political landscape persists.

Even so, the Pound could find a rallying point on Tuesday if the CBI industrial trends orders index picks up as forecast.

With investors expecting to see an improvement from -37 to -28 in November this could offer the GBP/USD exchange rate a boost.

As long as markets see signs that the slowdown in the UK manufacturing sector is bottoming out the Pound looks set to gain fresh ground next week.
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