- A combination of factors dragged GBP/USD lower for the second successive session.
- Worries that job losses will rise after the furlough scheme ends weighed on the GBP.
- The risk-on impulse benefitted the safe-haven USD and contributed to the selling bias.
- The USD bulls seemed rather unaffected by the disappointing US Retail Sales figures.
The GBP/USD pair remained depressed below the 1.3800 mark, or multi-week lows and failed to gain any respite from disappointing US macro data.
The pair extended the previous day's rejection slide from the 1.3875-80 supply zone and witnessed some follow-through selling for the second successive session on Tuesday. The British pound was being pressured by worries that job losses will rise after the furlough scheme ends in September. This, along with disappointment from the UK Claimant Count Change, overshadowed an unexpected fall in Britain's unemployment rate and stronger wage growth data.
On the other hand, the risk-off impulse in the market drove some haven flows towards the US dollar, which was seen as another factor that exerted downward pressure on the GBP/USD pair. Investors remain worried that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery. The concerns were further fueled by weaker US Retail Sales data, which weighed on investors' sentiment and benefitted the traditional safe-haven currencies.
In fact, the headline sales missed consensus estimates by a big margin and declined sharply by 1.1% in July. Adding to this, core retail sales (excluding autos) fell 0.4% during the reported month as against market expectations for a modest 0.1% growth. The data reaffirmed that the US consumer has grown more cautious in response to the latest surge in COVID-19 cases.
This might have forced investors to further scale back their expectations about an early policy tightening by the Fed, which was evident from the continuous decline in the US Treasury bond yields. The USD bulls, however, seemed rather unaffected by the developments, instead took cues from a generally weaker trading sentiment around the equity markets.
The market focus now shifts to Fed Chair Jerome Powell's scheduled speech, which will be closely scrutinized for some clues about the next policy move. This, along with Wednesday's release of the FOMC monetary policy meeting minutes, will influence the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair.