- U.K Economic Recession concerns
- Brexit Uncertainty
- Weak Economic data
The British Pound was under pressure against the dollar, in early Friday trading session. After tumbling 1.1% on Thursday, the GBP/USD pair was down by more than 0.2% on Friday as the Pound weakened across the board.
Sterling Weakness Catalysts
The sterling weakness stems from growing concerns about the health of the British economy ahead of easing of lockdown restrictions in the aftermath of the coronavirus. The Pound has since retracted from three months highs against the dollar as traders remain wary of what is at stake, going forward.
Trader’s focusing on the U.K’s coronavirus situation has been the biggest undoing to the Sterling Pound sentiments against the dollar. Weak economic data, on the other, continues to fuel bearish pressure sending the GBP/USD pair lower.
A confirmation that the U.K had its biggest monthly contraction in April all but continues to rattle sterling traders in the market. Immediate data indicates that the economy crashed 20.4% in April, more than ten times any pre-COVID-19 fall. Manufacturing production contracted 24.3%, with industrial production going down 20.3%.
OECD warned that the U.K Economy could slump by 11.5% in 2020 all but continues to fuel weakness in the Pound.
Brexit uncertainty is another development that continues to weigh heavily on the Pound strengthened against the dollar. Some EU officials have raised concerns over the lack of progress on the ongoing U.K-E.U negotiations, a development that continues to raise prospects of a hard BREXIT.
Looking ahead, traders await the Michigan Consumer sentiment report that should help shed more light on the health of the U.S economy. Likewise, the focus will be on the Michigan 5 year Inflation Expectations and the Michigan consumer expectations. The reports are likely to influence Dollar strength and, conversely, influence trader’s sentiments on the GBP/USD pair.