The pound tanked versus the US dollar on Friday. The pound US dollar exchange rate closed 0.5% lower at US$1.3010. On a weekly basis the sterling declined 0.4% against the US dollar, its second straight week of losses. The pound was on the back foot and slipped through the key psychological level of $1.30 as trading in the new week began.
Weak retail sales weighed on the value of the pound at the ed of the previous week. The latest retail sales data published by the Office National Statistics (ONS) showed that retail sales fell in December after a Christmas shopping spree failed to materialise in the crucial trading month. Retail sales dropped -0.6% month on month, rather than growth by 0.6% as analysts had forecast.
The data came following downbeat GDP data earlier in the week, which showed that UK economy unexpectedly contracted -0.3% in November, and weak inflation figures. As a result, concerns of the health of the UK economy have risen, as have expectations of the Bank of England easing monetary policy sooner rather than later. Should UK macro-economic data continue to disappoint, the central bank could cut interest rates when they next meet on 30th January. The prospect of lower rates is keeping pressure on the pound.
This week investors will be watching UK wage growth data and at the end of the week PMI’s for further insight into health of the UK economy.
Dollar Look To Trump’s Impeachment Trial
The dollar only made muted gains versus the weaker pound in the previous session, despite the signing of the first phase US – China trade deal. The reaction by investors to the signing of the deal has been lukewarm at best. The deal shows that tensions have eased significantly between the two powers. However, there are concerns not just over China’s compliance with the deal but also that many of Trump’s key issues have not been addressed.
In the absence of hug impacting US economic data this week, there is a chance that investors will look towards political developments in the US with the start of Trump’s impeachment trial.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 GBP = 1.28934 USD
Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound.
Or, if you were looking at it the other way around:
1 USD = 0.77786 GBP
In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar.