GBP to USD Forecast: Poor Retail Sails Hamper Pound

GBPEUR Forecast: Sterling Rises on Boris Bounce but for How Long

UK Retail Sales Plunge in December

The pound to US dollar rate mounted a steady recovery last Wednesday and Thursday, despite the gathering threat of an interest rate cut. However, it couldn’t fend off yet another disappointing data release on Friday, when it was revealed that retail sales plunged in December. Sales volumes slipped by 0.6% from November – the fifth month in a row without growth – as Christmas shoppers tightened their purse strings. This came in the wake of weak GDP and inflation readings earlier in the week. All of which added weight to the argument for an interest rate cut this month. So, it came as no surprise that Bank of England (BoE) policymakers were echoing Governor Mark Carney’s desire for “prompt” action.

The GBP to US dollar rate continued to feel the effects of the rate cut speculation this morning, causing it to dip below the 1.30 level.

US-China Trade Uncertainties Persist

A largely positive set of US data releases on Friday was overshadowed by uncertainties over the future of US-China trade relations, despite both parties signing a ‘phase one’ trade deal last Wednesday. US homebuilding surged to a 13-year high in December, as housing starts leapt 16.9% to an annual rate of 1.608 million units. The figures pointed towards a recovery in the US housing market, set to a backdrop of low mortgage rates.

Manufacturing production unexpectedly rose 0.2% in December following a downwardly revised 1.0% increase in November. However, overall industrial output fell 0.3% after a downwardly revised increase of 0.8% in November.

Looking Ahead

Do all roads lead to a rate cut later this month? This week’s UK data will have a huge influence over that decision – which the BoE will make a week on Thursday – and the next move for the GBP vs USD rate.

Following a quiet day in the calendar today, the ILO Unemployment Rate – which is forecast to tick up from 3.8% to 3.9% – hits the headlines tomorrow. The pace picks up on Friday, with the release of two significant readings: the Markit Manufacturing PMI and the Markit Services PMI. The pound vs US dollar rate could struggle if we receive more evidence that the UK economy is slowing down.

It’s a bank holiday in the US today, meaning Wednesday’s Housing Price Index and Existing Home Sales are the first releases of note this week.

If you would like to learn more about factors influencing GBP/USD exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.