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Pound to Dollar Rate Falls Sharply Ahead of “Freedom Day”

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The pound fell sharply against the dollar on Friday, ending the week at 1.37, having been within touching distance of the 1.39 benchmark on Thursday. The move lower came ahead of England’s so-called “Freedom Day”, with Prime Minister Boris Johnson moving England to stage 4 of the government’s roadmap out of lockdown today. This means the remaining closed businesses, including nightclubs, can finally unshutter their doors as legal restrictions are ended.

Despite acknowledging the inevitability of a post-Freedom Day wave of infections and more deaths, the PM said more harm would be caused by keeping the economy closed and a successful vaccine rollout has reduced the number of serious cases. The pound has been wedded to the progress of the UK’s rapid vaccine programme since the New Year, which will be severely tested by the scrapping of lockdown restrictions.

US retail sales unexpectedly increased in June

An empty UK economic data calendar on Friday left the pound vs dollar rate largely under the influence of strong US Retail Sales data – sending the pair lower as the dollar received further support. The US currency edged higher – recording its largest weekly gain in a month – after upbeat figures released by the Commerce Department raised expectations that economic growth accelerated in Q2.

US retail sales unexpectedly increased in June, rising 0.6%, after economists had forecast that they would drop 0.4%. Sales volumes were underpinned by strong demand for goods – even as spending shifts back to services – Covid-19 vaccinations, low interest rates and massive fiscal stimulus.

An influential survey showing US consumer sentiment unexpectedly waned in early July to the lowest level since February failed to check the dollar’s stride. The University of Michigan’s preliminary Consumer Sentiment Index dropped to 80.8 in the first half of this month from a reading of 85.5 for June. Economists had forecast the index would rise to 86.5. The dip in consumer morale was attributed to concerns about the economic recovery amid inflationary pressures.

Firm domestic data and changing interest rate expectations have given the dollar a boost in recent weeks. Last month the US Federal Reserve signalled sooner-than-expected rate hikes in 2023. The US currency’s strong performance on Friday came despite Fed Chair Jerome Powell reiterating a day earlier that rising inflation was likely to be transitory and the central bank would continue to support the economy.

Looking ahead

An extremely slow start to the week in the UK’s economic data calendar means investors in the pound must wait until Thursday evening for the first release of note when the GfK Group Consumer Confidence Index for July hits the headlines.

The first influential economic indicators from the US economy are slated for release tomorrow: Building Permits and Housing Starts – both for June.

The post Pound to Dollar Rate Falls Sharply Ahead of “Freedom Day” appeared first on Pound Sterling Forecast.


Source: https://www.poundsterlingforecast.com/2021/07/pound-to-dollar-rate-falls-sharply-ahead-of-freedom-day/


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