Although Sterling has eased from its best levels, the currency was bolstered on Thursday by better-than-expected UK retail sales data. Growth in consumer spending jumped by a higher-than-expected 1 per cent in June. The data provided GBP support as it reduced the risk of the UK economy shrinking during the second quarter. The data even helped the pound shake off the impact of Thursday’s report from the Office of Budget Responsibility (OBR). The report revealed that the economy would plunge into a recession and there would be a £30 billion black hole left in public finances. The fiscal watchdog even warned that recent data from June indicates that the UK has already entered a ‘full blown recession’. The US dollar, meanwhile, was weakened by the expectation that the Federal Reserve could cut interest rates by 0.5 percent later this month.
Expectations for a half percentage point rate cut rose to nearly 70 percent off the back of dovish comments from Federal Reserve President John Williams.
Sterling stuttered this morning however as UK public borrowing data revealed that the UK’s budget deficit hit a four-year high in June.
GBP/USD could dip further before the weekend if the University of Michigan Confidence index improves from 111.9 to 112.8 as forecast.
Looking ahead to the start of next week, the pound could be left under pressure as the Conservative leadership contest comes to an end.
If front-runner Boris Johnson is announced as the winner it is likely Sterling will slide as no-deal Brexit fears increase.