- GBP/USD continues to struggle, hovering around 1.3405 during Monday’s Asian session.
- The US dollar gains strength following weekend attacks on Iran.
- Retail sales in the UK dipped by 2.7% in May, impacting the pound.
The GBP/USD exchange rate is expected to decline further to about 1.3405 during the Asian trading hours on Monday. Concerns over potential Iranian retaliation to recent US airstrikes bolster the US dollar, driving investors towards safe-haven assets. Market participants are also looking ahead to the preliminary June Purchase Manager Index (PMI) readings for both the UK and the US, which will be released later today.
The U.S. executed airstrikes on three Iranian nuclear facilities early Sunday, despite President Trump’s previous commitments to refrain from engaging in another foreign conflict, as reported by Bloomberg. Trump claimed the strikes destroyed Iran’s key nuclear enrichment sites and warned of a “far bigger” response if Iran does not pursue peace. Iran has vowed to retaliate, maintaining that “all options” are available. Heightened tensions and broader fears of conflict in the region typically drive demand for safer asset classes, benefiting the dollar against the pound.
UK retail sales figures reveal a concerning decline, leading traders to speculate about potential interest rate cuts from the Bank of England (BOE). Retail sales dropped by 2.7% in May, a stark contrast to the anticipated 0.5% decline. This follows a revision of growth figures previously reported by the Office for National Statistics (ONS).
During its widely anticipated June meeting, the BOE decided to maintain the interest rate at 4.25%. Governor Andrew Bailey indicated that rates are on a gradual downward trajectory but also noted the unpredictability of the global landscape. Analysts surveyed by Reuters are anticipating a 25 basis point (BPS) cut at the August meeting, with an additional potential cut later in the year.
