English>

Market News

Pound hits lowest level in six weeks - YAHOO FINANCE

JUNE 19, 2021

BY  LaToya Harding  ·Contributor

The pound slumped to its lowest level in six weeks against the dollar (GBPUSD=X) on Friday as the greenback strengthened on news from the Federal Reserve this week, and UK retail sales fell in May.

Sterling was 0.16% lower against the dollar in noon trade at $1.3904, and slipped 0.2% against the euro (GBPEUR=X) to €1.1671, down from a 10-week high on Thursday. During the session the pound fell as low as $1.386 for the first time since 6 May.

The dollar has gained momentum this week after the US Federal Reserve updated its “dot plot” on Wednesday night, showing it has pulled forward its first expected post-pandemic rate rise to 2023 as it looks to prevent overheating in the economy.

The dot plot maps out each member’s expectations for rates over coming years. In March this year it showed the median member expecting no rate hikes through that time horizon. The upward revision suggests that the Fed sees a faster-than-expected recovery.

The Fed also held interest rates at near-zero, and reiterated its commitment to its asset purchase programme, which is absorbing about $120bn (£85bn) a month in assets.

The pound has fallen 1.6% since the Fed's announcement on Wednesday. Chart: Yahoo Finance
The pound has fallen 1.6% since the Fed's announcement on Wednesday. Chart: Yahoo Finance

The pound has fallen by 1.6% since the Fed accelerated its expected pace of policy tightening. Although it has strengthened this year on the back of a successful vaccine rollout programme in the UK, it was also affected this week by poor retail sales in May and rising COVID cases in Britain.

Retail sales volumes declined by 1.4% between April and May 2021, new figures showed, as the reopening of hospitality venues hit spending at food shops.

This was below economists’ expectations of 1.6% growth, but shoppers still have an estimated £200bn ($277bn) in pent-up savings to spend, the Office for National Statistics (ONS) said.

The data revealed that the largest contribution to the monthly decline last month was from food stores such as supermarkets – sales volumes fell by 5.7%.

“The pound lost ground versus other major currencies during early Friday trading, following the publication of May’s retail sales figures for the UK, which fell short of expectations,” Ricardo Evangelista, senior analyst at ActivTrades, said.

“Investors looked at last month’s performance of the retail sector with some concern, as the country’s economic recovery, and the strong performance of the pound, have to a large extent been driven by consumers spending savings accumulated during the months of lockdown.

“This slowdown could mark the end of a ‘Goldilocks’ period for sterling, with the shine of a successful vaccination programme wearing off, following the extension of the country’s partial lockdown, and consumer spending receding as the end of furloughs looms.”

The UK recorded more than 11,000 new cases of the coronavirus on Thursday as the Delta variant, which was first detected in India, continues to spread.

“Rising case numbers are certainly not helping sentiment,” Jeremy Stretch, head of G10 foreign-exchange strategy at Canadian Imperial Bank of Commerce, told Reuters.

Pound sentiment for the coming month is at its most bearish since April, according to risk reversals, a gauge of market positioning.


SEE HOW MUCH YOU GET IF YOU SELL

NGN
This website uses cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you've provided to them or that they've collected from your use of their services
Real Time Analytics