GBP/USD: Pound Sub US$1.30 On Brexit Concerns & Coronavirus Headlines

The pound is pulling back from the one week high struck on Tuesday. The pound US dollar exchange rate rallied to a peak of US$1.3018 in the previous session on broad dollar weakness and encouraging mid-tier UK data.

GBP/USD is trading -0.1% at US$1.2990 at 06:15 GMT as the dollar steadies and as Brexit moves back under the spotlight.

UK Shop Prices Fall, Brexit In Focus

The pound is on the back foot in early trade on Wednesday after data revealed that shop prices fell this month amid weak consumer demand. The British Retail Consortium (BRC) shop price index showed that prices fell -0.6% in February, compared with a 0.3% decline in the previous month. Whilst consumers will welcome the fall in prices, they could also point a softening in inflation.

Last month inflation ticked up to 1.8% just shy of the Bank of England’s 2% target. Early signs suggest that this could be a temporary spike higher. Falling inflation is pound negative because the central bank will be more inclined to cut interest rates than hike rate.

Today there is no high impacting UK economic data due to be released. Investors will continue to focus on Brexit ahead of the start of post Brexit trade talks next week. Ministers from the EU have approved their mandate. It says that EU rules should serve as a reference point.

UK ministers have agreed the government’s mandate which will be published on Thursday.

US Dollar Volatility On CDC Warning

The dollar inched higher in early trade on Wednesday, however gains have been limited as the Federal health authorities warned that they expect a wider spread of coronavirus in the US.

Nancy Messonnier, the director of National Centre for Immunization and Respiratory Diseases at the Centres for Disease Control and Prevention (CDC) warned over the coronavirus outbreak, saying in a news briefing that the CDC expect a rise in the number of cases.

US stocks dived following her remarks. The dollar also fell as investors attempt to gauge the potential economic impact that coronavirus could have and increase the odds of an interest rate cut by the Federal Reserve. However, the greenback is recovering in early trade today.

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