GBP/USD – 2% weaker from Tuesdays high

Daily Currency Update

The Pound has weakened further against the US Dollar on Thursday as investors hope that that the Bank of England won’t hike interest rates by a wide margin now since inflation has responded well to easing food prices offered by producers at factory gates. However, it's viewed that tightening is likely to continue as the United Kingdom’s current inflation is significantly higher than the desired interest rate of Bank of England’s target. An interest rate hike of basis points would push rates to 5.25% it’s here that the Pound meets resistance against the US Dollar above 1.2950 while the Bank of England desires the 2% target route.

Inflation has softened in June past the expected reading with the price of goods at factory gates decreasing. Producers are seen to pass on the decline in cost of raw material to the end consumer, however the drastic measures the BoE have taken to bring down inflation appear to harm the economic outlook, leaving investors with mixed views and waiting for further understanding of how far the BoE's rate hiking cycle. The pound showed some modest gains against the US Dollar this morning, as the United Kingdom Retail Sales data presented a more resilient than expected reading. rebounding slightly as consumer spending growth expanded strongly in June. The monthly Retail Sales in June expanded by 0.7% vs. expectations of 0.2% and annual consumer spending data decreased by 1.0% against the expected reading of -1.5%. Overall, since Thursday's highs of the mid of 1.29 level the Pound has been facing some selling pressures against the US Dollar.