- UK GDP contracts -20.4% mom in April
- Brexit continues to weigh on demand for Pound (GBP)
- Safe haven US Dollar (USD) remains well bid ahead of consumer confidence data
- At 06:15 UTC, Pound to US Dollar (GBP/USD) is trading -0.15% at US$1.25
The Pound is trading steadily after snapping its longest winning run versus the US Dollar since 2018. The Pound US Dollar settled on Thursday -1.37% at US$1.2574, just up from the session low whilst wiping out all of sterling’s gains across the week.
At 06:15 UTC, GBP/USD is trading flat at US$1.2574 amid continued covid-19 concerns and following UK GDP data.
The British economy shrank by a record breaking -20.4% month on month in April, worse than the -18.4% contraction that analysts had forecast. The data reflected the first full month of lockdown, with retail, travel and hospitality sectors unsurprisingly taking the biggest hit, whilst manufacturing and construction were also badly affected. The fall, which builds on an initial 5.8% fall in March shows that the UK economy contracted by a quarter between February and April.
Brexit also continues to add pressure to the Pound as the EU and the UK still appear have a lot of ground to make up before reaching a post Brexit trade deal. EU Chief negotiator Michel Barnier accused the UK is wanting all the positives of EU membership without any of the obligations.
The US Dollar is edging higher across the board amid a continuation of the risk off trading sparked by a more cautious Federal Reserve, dire projections from the central bank, in addition to growing fears of a second wave of coronavirus in the US. Infections in the US are starting to rise after 5 weeks of declining, boosting fears that the reopening of the economy could be slowed.
Today investors will look ahead to the University of Michigan consumer confidence data. Analysts are expecting sentiment to pick up in June to 75, up from 72.3. This would reveal just a slight increase of household sentiment, potentially disappointing investors who are looking for a much more bullish recovery.
