The pound continued its slide lower against the dollar after Prime Minister Boris Johnson announced on Monday that there will be no easing of coronavirus restrictions on 21 June as originally planned – with news of the rapid spread of the Delta variant in the UK weighing slightly on sentiment towards the pound. But its has been a strengthening dollar that has been largely responsible for dragging the pound vs dollar rate below 1.40 for the first time since early May.
The pair fell on Wednesday and Thursday after the US Federal Reserve surprised investors by stating that it’s prepared to raise interest rates and pull the plug on emergency bond-buying sooner than expected – extending the dollar’s gains against the pound. Federal Open Market Committee members projected an accelerated timetable for rate hikes in their latest meeting minutes, as they lay the foundations for tapering the central bank’s pandemic-driven monetary policy. The rhetoric pushed US Treasury yields higher, with equities falling – and overshadowed several soft data releases from the US economy yesterday.
Initial jobless claims increased unexpectedly for the week ended 11 June, despite an ongoing recovery in the US jobs market, the Labor Department said yesterday. First-time filings for unemployment insurance totalled 412,000, compared to 375,000 the previous week. Not only did it exceed economists forecast of 360,000 new claims for last week, it was the highest number since 15 May.
The Federal Reserve Bank of Philadelphia reported that the headline Manufacturing Activity Index of the Manufacturing Business Outlook Survey fell to 30.7 in June from 31.5 the previous month, missing the market expectation of 31.
UK retail sales slip
UK retail sales fell last month as food shopping was hit by the reopening of restaurants. However, overall volumes are still higher than pre-pandemic levels.
The Office for National Statistics said retail sales dropped by 1.4% between April and May, following a jump in April when ‘non-essential’ retailers were finally allowed to reopen their doors after months of closure.
During April and May combined, however, average total retail sales volumes remained 7.7% higher than in March, when large swathes of the high street remained closed, and 9.1% higher than in February last year before the pandemic struck.
This morning, the pound to dollar rate slipped to 1.38 for the first time since early May.
The latest Consumer Inflation Expectations figure is released by the Bank of England this morning – a percentage that consumers expect the price of goods and services to change during the next 12 months.