GBP/USD is on the rise for the second day in a row, hovering around 1.2870 during the Asian trading session on Friday. The boost in risk sentiment, fueled by better-than-expected US Retail Sales data, has alleviated fears of a US recession and lifted risk-sensitive currencies like the Pound Sterling (GBP).
Moreover, the British Pound saw an uptick following positive economic indicators released on Friday, including the Gross Domestic Product (GDP) data from the UK. The UK economy expanded as expected in the second quarter, with a 0.6% increase quarter-on-quarter. Additionally, the GDP rose by 0.9% year-on-year in Q2, exceeding expectations.
Investors are eagerly awaiting the UK Retail Sales data set to be released later today, with forecasts of a 0.5% monthly increase in July, up from the previous decline of 1.2%. Annual growth is also expected to rebound by 1.4%, reversing the previous decline.
On the other hand, the US Dollar (USD) is facing pressure as traders have already factored in a 25 basis point rate cut by the Federal Reserve in September. Although a 50 basis point cut is still a possibility, with a 26% chance according to the CME FedWatch tool.
Despite the Dollar’s struggles, it received some support from positive US economic data released on Thursday. US Retail Sales showed a significant 1.0% increase in July, surpassing expectations and indicating a strong consumer spending trend. Additionally, Initial Jobless Claims came in lower than forecasted for the week ending August 9.
Looking ahead, investors will keep an eye on the preliminary US Michigan Consumer Sentiment Index for August and Building Permits for July later in the North American session.
Analysis:
The Pound Sterling is gaining strength against the US Dollar due to positive economic data from the UK and improved risk sentiment following strong US Retail Sales figures. The UK Retail Sales data, expected to show growth in July, is further boosting the Pound’s performance. On the other hand, the US Dollar is under pressure as traders anticipate a rate cut by the Federal Reserve in September. This dynamic between the two currencies can have a significant impact on global financial markets and individual investors’ portfolios, highlighting the importance of staying informed and making informed investment decisions.