- Pound (GBP) slips despite encouraging BRC retail sales data showing a marked improvement in May
- UK – Japan trade talks begin
- Demand for safe haven US Dollar (USD) increases as North South Korea tensions rise
- At 07:15 UTC, Pound to US Dollar (GBP/USD) -0.2% US$1.27
After nine straight sessions of gains, the Pound is edging lower in early trade on Tuesday. The Pound US Dollar exchange rate has rallied from a $1.2261 to and overnight high of US$1.2756 since 28th May. The Pair settled on Monday +0.04% at US$1.2723.
At 07:15 UTC, GBP/USD is trading -0.2% at US$1.27 despite Pound fundamentals remaining positive, except Brexit. The move lower is mainly owing to a broadly stronger US Dollar.
The Pound eased after British retailers reported a steep fall in annual sales last month. However, the decline was less than that in April as some stores reopened in May amid the coronavirus lockdown. According to the British Retail Consortium (BRC) total retail spending was -5.9% lower compared to a year earlier. This was a significant improvement on April’s -19.1% drop, when almost all non-essential retailers were closed. That said, May’s drop was still the second largest fall on record. The data adds further evidence that the UK economy is slowly starting to reopen and recover from April’s sharp shock.
Brexit concerns continue to linger amid the lack of progress between the UK and the EU in recent trade talks. Today the UK will begin trade talks with Japan, with the two sides keen for a free trade deal within a year. An ambitious aim.
The US Dollar has been broadly out of favour as the risk on rally from reopening economies saw investors shun the safe haven currency in favour of riskier assets. However, today a risk reset amid growing tensions between North and South Korea. North Korea has cut off all communication lines with South including a hotline between the nations two leaders. The move comes following a row over leaflets being sent to North Korea.
There is no high impacting US economic data due to be released today. Investors will look ahead to the Federal Reserve monetary policy meeting where the Fed faces a difficult balancing act, to remain supportive as data starts to show signs of improvement.
