The GBP/USD slips below 1.41 levels. The new coronavirus variant that has delayed the lockdown easing in the UK and the Brexit issue add pressure on the Sterling.
Sterling Trades Below 1.41 levels
PM Johnson has expressed concern over the spread of the Covid variant. The sterling faces pressure with a delay in the easing of lockdown measures. The standoff between the UK and the EU regions over the Northern Ireland protocol adds pressure on the British pounds to dollars. Though job report in the UK is good and the unemployment rate has gone down, the GBP/USD currency pair has moved below the psychological support at 1.41 levels.
The sterling slipped from the 1.41 levels at the start of the week. The GBP/USD moved lower to the mid-May levels at 1.4069 levels during trading hours on June 15. It has another major support at 1.4050 levels, below which the slide may accelerate.
British Pound to USD Under Pressure with Delay in Lockdown Easing
The reopening of the economy after the lockdown gets delayed. UK PM Boris Johnson has announced lockdown restriction easing. The easing of lockdown restriction was scheduled for June 21 but has got postponed to July 19. The PM is confident that the delay will not last longer than four weeks.
The new Covid variant has spread fast in various parts of Britain. The PM and his team of health officers have put off the reopening to control the Delta Covid variant. The Delta variant was first identified in India. The pound has lost steam with the Covid variant raising its head. Further support measures are expected from the government, as the extension of restrictions will affect jobs and income.
Brexit Talks Adds Pressure on the Sterling
PM Johnson faces issues regarding the Brexit Withdrawal Agreement. There is tension around the British pound as the check on goods entering Northern Ireland has increased. The EU and UK are at loggerheads once again over the Brexit deal agreement. Talks between the UK Minister David Frost and European Commission Vice President Maros Sefcovic will help to prevent the deadlock, say authorities. The G7 summit over the weekend has the European Union pressurizing the United Kingdom over the Northern Ireland protocol.
British Pounds to Dollars Lack Strength Despite Good Data
The Sterling has weakened with the US dollar gaining strength.
UK Chancellor Rishi Sunak says that there is overall growth in economic activity. The annual growth of rate in April at 27.6% indicates economic development. UK GDP has grown 2.3% in April, while in March, the growth was 2.1%.
For the three months ended April 2021, the GDP has grown 1.5% in the United Kingdom. The number of employed people is increasing. The furlough scheme has helped the people during the period of joblessness and business closures. The scheme will be in place till September, say officials. The Kickstart Scheme has been a good venture in providing jobs to the young population. It provides funds to create new jobs for the youth in the age group 16 to 24 years, who are at risk of unemployment. The GDP has gone up for the third consecutive month. The growth is fastest since July last year.
Construction Output m/m has declined 2.0% in April, from a growth of 5.8% in March. Industrial production has gone down 1.3% as business shutdown brought down production of car plants. Agriculture and chemicals have suffered losses. Export levels have gone down, while imports have gone higher, which adds pressure to the British pound to USD.
The pandemic has helped to increase online activity in retail sales and clothing. People prefer to shop online instead of visiting shops. The lockdown period has restricted spending and increased savings. People are willing to spend more, as they can move outdoors after the covid-19 lockdown restrictions are relaxed.
The British Retail Consortium (BRC) which measures same-store sales in retail outlets in Britain has declined. The weaker than expected reading is bearish for the British pound. Accommodation services have gone up 68.6% as holiday tourism picks up. Restaurants and cafes have reopened with outdoor seating areas, showing 39% growth. Hairdressing and other personal services activities have gone up 63.5%.
US Dollar Index Gains Steam
The dollar has strengthened, which has lowered the pound. The dollar is trading above the psychological mark at 90.00 levels. It has been a strong resistance area, and the USD has to surge higher to retain its upward streak.
The US Chairman Jerome Powell will not be tapering the bond-buying scheme for now say, experts. The US 10-year bond yields are at a three-month low. The S&P500 has posted new record levels. Inflation rates are moving higher, but the US Fed says that inflation is transitory and will not affect the economy. However, critics question the loose policy of the central bank, saying that policy control has to take place.
The British pound to euro today trades in a range-bound movement between 1.1650 and 1.1580. The pound to euro today is at 1.1614 during forex trading hours on Tuesday, June 16.