GBP/USD Drops Under 1.2300

The GBP/USD currency pair has dropped yet again by 20 pips. It has also renewed the intraday low in the vicinity of 1.2259. This is close to 1.2270 as of the time of putting this together.

UK Retail Sales Create Higher Concerns

The United Kingdom’s retail sales have kept increasing concerns about the health of the economy. Apart from the economic data, election results weigh on the pair. The loss of the Conservative Party in the recent by-elections drowns the GBP/USD pair.

The United Kingdom’s retail sales grew to -0.7% against -0.5% month on month. This came against the initial print of 0.4% which was recorded.

GBP/USD price chart. Source TradingView

There was a drop in the annual number to about -4.7% from the -5.7% initial reading. The expected figure according to the market was -4.5%. All these have weighed heavily on the price of the GBP/USD pair recently.

On Thursday, the United Kingdom’s S&P Global PM Index equally expressed some concerns. The concerns too were closely tied to the fate of the British economy. It contributed to pushing the Bank of England towards an aggressive interest rate increase.

The United Kingdom’s S&P Global MP Index fell to 53.4 in the month of June. This came against the 53.7 that was speculated and 54.6 recorded in May. The service PM Index came back with the last figure of 53.4 recorded in May.

Noted that the Prime Minister, Boris Johnson suffered a defeat in the Conservative Party. The Conservative seats were normally thought to be safe but the tides changed. Part of the result is a downward pressure exerted on the GBP/USD pair.

Labor Party won the Wakefield seat. The Liberal Democrats, on the other hand, clinched the Honiton and Tiverton seats.

The US and the Dollar Dynamics

In the United States, the Dollar was unable to top the corrective pullback in the Treasury yield. There are general fears of a slowdown in the economy and rapid interest rates. There are still troubles going on with the supply chain.

The Dollar index shed off 0.15% intraday to land at 104.25 recently. Furthermore, the US ten-year Treasury yields recovered from a two-week slide. The recovery flashed on Thursday while traders waited to confirm the economic slowdown.

The bond’s coupon is getting set to encounter its first loss on a weekly basis. It will be the first in four weeks as it takes a slide from the top levels since 2011. The coupon is at 3.09% as of press time.

After seeing a reduced reaction to the UK report, GBP/USD traders give focus to risk catalysts. This will give them new momentum as needed. 

Therefore, comments from Huw Pill will be carefully monitored for directions. Huw Pill is the Bank of England Chief Economist and Executive Director.