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GBP lower on risk aversion

GBP - British Pound

The pound continued to slide lower against the EUR and USD yesterday as risk appetite evaporated on global concerns. The US Federal Reserve stated earlier this week that they are on the verge of reigning in its pandemic-era monetary stimulus measures, while the COVID-19 Delta variant continues to spread. A move that many believe could impact global growth. Amongst this, China is currently going through a regulatory crackdown and Afghanistan is currently in turmoil. All paint a less than pretty picture for investors who have sold the pound looking for safe haven alternatives such as the US dollar.

GBP/USD started Thursday above 1.3700, but has gradually fallen and now test a fall below 1.3600. GBP/EUR had been above 1.1750 yesterday morning, but is now closer to 1.1650.

To add to sterling woes, UK retail sales data was released early this morning. A minus 2.5% slump was seen on the month in July against an expected 0.2% growth, a dramatic slowdown from the 0.5% growth in June. It seems, for now, the pound will be on the decline.

Key Movers

The USD will likely remain volatile ahead of next week's Jackson Hole and Fed Chair Powell’s speech. Markets will be looking for any further clues around the next steps from the Fed on tapering its bond-buying program. The news earlier this week has spooked the markets, as some believing it to be too soon with all the recent global concerns. At the end of July, GBP/USD had tested a break through 1.4000 but now edges closer to testing the 1.3575 support. The USD has also seen significant gains against the AUD and NZD.

If next week's data suggest that the Fed’s move to taper is premature, we may see some correction in these recent moves – the USD will give back some of its recent gains.

Expected Ranges

GBP/USD: 1.3575 - 1.3680 ▼

GBP/EUR: 1.1630 - 1.1710 ▼

EUR/USD: 1.1640 - 1.1720 ▲

GBP/AUD: 1.9030 - 1.9190 ▲

GBP/NZD: 1.9880 - 2.0050 ▼