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Pound US Dollar (GBP/USD) Exchange Rate Dips as UK Retail Sales Slowed in May

May 25, 2021 - Written by John Cameron

GBP/USD Exchange Rate Falls as Lockdowns Threaten to Weaken UK Economic Recovery

The Pound US Dollar (GBP/USD) exchange rate dipped today after the latest retail sales data for May fell following April’s surge. The pairing is currently fluctuating around $1.41.

The Pound (GBP) struggled against the ‘Greenback’ today as doubts are beginning to limit confidence in the UK’s economy.

Ben Jones, Principal Economist at the CBI, commented on the report, highlighting concerns over lockdowns limiting the strength of the nation’s economy:

‘As the economy moves toward a new normal, it’s clear that the pandemic has exacerbated pre-existing challenges for some retailers. The trend away from bricks-and-mortar retail has accelerated, while rent arrears and accrued debts have added to the cumulative burden of costs. The lockdown may be over, but its impact on the sector will be felt for a good while yet.’

Meanwhile, a modest rise in Covid-19 cases has sparked concerns over whether the Government could rethink its roadmap for easing lockdown measures next month.

As a result, the Pound US Dollar exchange rate has been limited by growing concerns that Britian’s economic recovery could face further barriers in the months ahead.

US Dollar (USD) Exchange Rate Rises Despite Falling US Treasury Yields

The US Dollar (USD) rose against the Pound (GBP) today despite falling US Treasury yields limiting the appeal of the ‘Greenback’.

Yesterday also saw key members of the Federal Reserve’s monetary policy board comment that the current state of US inflation was largely ‘transitory’.

Consequently, risk sentiment has improved, weakening demand for the safe-haven US Dollar.

Nevertheless, some demand for the US Dollar remains as Covid-19 cases continue to rise in places like Australia’s second-largest city, Melbourne.

Today also saw US new home sales fall last month, dampening confidence in the world’s largest economy.

Chief Investment Strategist at Chalses Schwab & Co, Liz Ann Sonders, tweeted:

‘April new home sales weaker at -5.9% vs. -7% est. & +7.4% in prior month; note massive revision to prior month, which was previously at +20.7% … overall level remains broadly unchanged over last year; median new home price rose +20.1% y/y.’

GBP/USD Exchange Rate Forecast: Could US Fed Comments on Inflation Boost the ‘Greenback’?

US Dollar (USD) traders will be awaiting tomorrow’s release of the latest US MBA Mortgage Applications for May.

Any improvement in the outlook for the US economy could boost the USD/GBP exchange rate.

Tomorrow will also see a speech from the Federal Reserve’s Randal Keith Quarles, the vice chair for supervision for the Fed’s Board of Governors.

Any comments about the transitory nature of US inflation, however, could drag down demand for the ‘Greenback’.

The Pound US Dollar (GBP/USD) exchange rate could head higher this week, however, if the outlook continues to improve for the British economy.

If Covid-19 rates remain low throughout much of the UK, then Sterling would benefit from growing confidence in the outlook for the nation’s economy.

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