- Pound weakens near the end of the week amid risk aversion.
- GBP/USD could post the lowest weekly close since April.
The recovery of GBP/USD was short-lived and after reaching 1.3865, it turned to the downside. Recently broke under European session lows and fell to 1.3771, hitting the lowest level since July 9. It remains under 1.3800, on its way toward the lowest weekly close since April.
Over the last hour the pound weakened across the board. EUR/USD broke above 0.8555 while GPB/USD under 1.3800. At the same time, equity indices turned negative in Wall Street. The Dow Jones is down by 0.25% and the Nasdaq 0.07% after a positive opening.
Economic data from the US came in mixed. Retail sales surpass expectations with an unexpected increase of 0.6% in June. The preliminary reading of consumer sentiment from the University of Michigan showed a decline in the main index to 80.8, below the 86.5 expected. Next week, no major economic reports are due in the US and Fed’s officials will remain in silence ahead of the next FOMC meeting (July 27/28).
Comments from Bank of England officials during the week, pointing to the need to reduce asset purchases earlier than expected, failed to lift the pound significantly. “The impact on GBP was limited, partly because the next step in the eventual policy normalisation process (rate hikes) remains still some way off. Despite the increasing Covid-19 cases, the UK government will deliver the final part of the reopening/end of restrictions on 19 July”, explain ING analysts. Next week UK data includes June retails sales and July PMI, both reports due on Friday.
