British Pound holds gains against a weak US Dollar despite downbeat UK Retail Sales
The British Pound (GBP) trades firm against the US Dollar (USD) on Friday, with the GBP/USD pair pushing against six-month highs in the 1.3660 area at the time of writing, on track for a 0.8% weekly rally.
The British Pound (GBP) strengthened against the US Dollar (USD) on Friday, reaching six-month highs near 1.3660, marking a 0.8% weekly increase. Despite UK Retail Sales showing a decline in July, the USD remained weak, driven by the US Treasury's bond buyback plans. According to National Statistics, UK retail consumption dropped by 0.5% in July, matching forecasts, after rising by 0.7% in June.
Year-over-year sales grew by 1.6%, down from June's 3.8% and below the 2.2% consensus. This decline was widespread; excluding fuel, sales of all other goods fell by 0.9% in July, reversing June's 0.9% increase. On top of that, Public Sector Net Borrowing rose by GBP 1.8 billion in July, surpassing market expectations of GBP 0.3 billion but lower than June's GBP 12.78 billion.
US Treasury Secretary Scott Bessent stated on Thursday that bond buybacks could exceed the $4 billion per operation plan, announced the previous day. The US Treasury announced on Wednesday a strategy to double liquidity for repurchasing long-term securities, aiming to curb the yield rally. However, strategists at BBH warned that this move could be seen as a debt-management swap, where the Treasury trades older, less liquid bonds for new, more liquid ones, potentially undermining US fiscal credibility and negatively affecting the USD.
Retail Sales, published monthly by the Office for National Statistics, gauges the volume of goods sold by retailers directly to consumers in Great Britain. A high figure supports the Pound Sterling (GBP), while a low figure weakens it. The Ex-Fuel Retail Sales data, also released monthly, tracks the same metric, excluding automotive fuel.
The GBP/USD pair was around 1.3650 in the European session on Friday, despite the weaker-than-expected UK Retail Sales data. The USD remained under pressure after the Treasury Department's decision to boost long-term bond purchases. Meanwhile, EUR/USD consolidated its weekly gains around 1.1700, with investors awaiting preliminary August PMI data from Germany, the Eurozone, and the US.
Gold hovered near its highest level since early June, trading just above $4,550 into the European session, benefiting from the weaker USD.
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