- UK household spending drops -40%, vs 30% forecast by BoE
- Brexit talks seeing little progress
- US consumer price inflation exp -0.8% mom April
- GBP/USD -0.1% at US$1.2318 at 07:15 UTC. Real time exchange rates
The Pound is falling versus the US Dollar for a second straight session on Tuesday. The Pound US Dollar exchange rate settled on Monday -0.65% at US$1.2336, wiping out gains from the end of last week.
At 07:15 UTC, GBP/USD is trading -0.1% at US$1.2318 amid growing fears of a second wave of covid-19 infections and as investors look ahead to US inflation data.
The Pound is trading on the back foot as concerns over the impact of coronavirus on the UK economy weighs on demand. According to real time data from a large survey of bank accounts, household spending dropped by 40% in April. This is significantly worse than the 30% that the Bank of England forecast when it concluded that the UK was heading for the worst recession in 300 years.
The data comes after the BoE’s Chief economist Andy Haldane warned that the pandemic will leave permanent scars on Britain’s economy as households and businesses cut back on spending.
Brexit is also keeping the Pound under pressure as trade talks continue. These are the penultimate round of talks prior to the June deadline for extending the 31st December transition deadline. Headlines suggest little progress has been made on sticking points.
There is no high impacting UK data today. Investors will look ahead to a barrage of data due for release tomorrow. The most closely watched reading will be GDP, which analyst predict will -7% month on month in March.
The US Dollar is holding on gains from the previous session amid a broad risk off climate and rising safe haven demand. As countries continue to reopen fears are growing over the prospect of a second wave of infections.
Looking ahead US inflation data is expected to attract some attention in addition to numerous Federal Reserve policy makers hitting the airwaves.
Analysts are expecting US inflation, as measured by consumer prices to decline -0.8% month on month in April as consumption dropped sharply in lockdown. Onan annual basis inflation is expected to increase 0.4%, well short of the Fed’s 2% target.
