- Pound (GBP) slumps even as UK non-essential shops reopen
- Brexit concerns linger ahead of leaders meeting later in the week
- Safe haven US Dollar (USD) in demand as covid cases rise steeply in US and part of Beijing is back under lockdown.
- At 06:15 UTC, Pound US Dollar exchange rate (GBP/USD) trades -0.6% at US$1.2462
Risk aversion is dragging on the Pound US Dollar exchange rate at the start of the week, extending losses from the previous week. The Pound US Dollar exchange rate lost 1% last week, settling on Friday at US$1.2542.
At 06:15 UTC, GBP/USD is trading -0.6% at US$1.2462. This is at the lower end of the daily traded range, as fears of a coronavirus resurgence weigh on demand for cable, even as the UK reopens non-essential shops.
Today all British non essential shops can open their doors and trade again for the first time in three months. The flattening of the covid-19 curve has been frustratingly slow pace in the UK, holding up the reopening process. Pressure is building on the Prime Minister Boris Johnson, particularly after data last week revealed that the UK economy contracted by 20% in May.
Meanwhile, the World Health Organisation has warned that the UK could be rushing the easing of lockdown measures and risks a second wave of infections.
This week is a key week for the Pound, with the Bank of England rate decision and a barrage of data, including the unemployment rate, retail sales and inflation. Additionally, Brexit will remain on the radar as Boris Johnson prepares to meet with European leaders later in the week.
The US Dollar is in favour as investors seek out its safe haven properties amid growing concerns over a second wave of coronavirus infections. The US reported a daily rise of 25,000 new covid-19 cases, with some states recording a record rise in new infections as lock down measures are eased. 24 states are reporting an sharp increase in cases, part of Beijing has returned to lockdown after 50 new cases of coronavirus appeared over the weekend. Fears are growing that a second wave of infections will dampen any economic recovery.
Looking ahead there is no high impacting US data due for release today. However, US retail sales and a testimony from Federal Reserve Chair Jerome Powell before Congress on Wednesday and Thursday will be in focus. A more upbeat outlook from Fed Powell, compared to his gloomy forecast last week, could lift risk sentiment and lower demand for the US Dollar.
