GBP/USD weakens to near 1.3300 ahead of UK Retail Sales release
- GBP/USD drifts lower to near 1.3310 in Friday’s early Asian session, down 0.21% on the day.
- The UK Finance Minister said she was confident Britain could reach a trade deal with the US.
- UK March Retail Sales report will take center stage later on Friday.
The GBP/USD pair attracts some sellers to around 1.3310 during the early Asian session on Friday, pressured by the renewed US Dollar (USD) demand. The UK Retail Sales data for March will be the highlight later on Friday.
The Greenback edges higher amid the optimism about a US trade deal announcement, which acts as a headwind for the major pair for the time being. UK Finance Minister Rachel Reeves said on Thursday she was confident Britain could reach a trade deal with the US.
Reeves is scheduled to meet US Treasury Secretary Scott Bessent on Friday. High on the agenda will be a possible trade deal, which Britain hopes will reduce the hit from Trump's import tariffs to its exporters of goods, including cars and steel. Investors await further developments in the US-UK trade talks.
The gloomy UK economic outlook and rising bets of further rate cuts by the Bank of England (BoE) could drag the Pound Sterling (GBP) lower. The International Monetary Fund (IMF) anticipated three interest rate cuts by the BoE and has revised UK Gross Domestic Product (GDP) growth for 2025 to 1.1% from 1.6% forecast earlier.
The UK Retail Sales data for March will be closely watched on Friday. The figure is expected to decline by 0.4% MoM in March after rising by 1% in February. In case of a stronger-than-expected outcome, this might help limit the GBP’s losses in the near term.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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