GBP/USD shot up toward the 1.3450 level on Friday, nearing a multi year high. This dramatic increase continues a well-documented trend. It is being driven by the selling pressure on the US Dollar and a run of positive economic data coming out of the United Kingdom. The currency pair’s upside journey is an expression of changing market dynamics, above all else the rising fears on the US fiscal agenda.
On Friday, in early European trading, GBP/USD spiked to 1.3450. Further forward near term this spike was driven by the publishing of UK Retail Sales numbers for April. Our final positive surprise came courtesy of the retail sales report, which grew by a blistering 1.2%, well over 5x the market consensus of 0.2%. This good economic news has given a boost to Pound Sterling, making it even more attractive relative to the US Dollar.
Indeed, the path of least resistance for GBP/USD clearly favors an upward trajectory. According to analysts, the latest momentum only strengthens the case for further extending the uptrend that’s more than a week old. This followed largely favorable retail sales data that pleasantly surprised investors about the strength of the UK economy. At the same time, the UK is profiting from a stronger US Dollar.
The US Dollar is under increasing pressure as fears over the fiscal situation continue to rise. The US House of Representatives just passed President Trump’s tax bill. This has led to renewed speculation on whether and when the spending bill will explode government debt in the outyears. These uncertainties have contributed to a general sell-off of the US Dollar, hurting all currencies against the greenback and putting downward pressure on GBP/USD.
Furthermore, this deteriorated sentiment about the US Dollar has lent some tailwinds to other important currencies too. EUR/USD jumped back above 1.1300 on the back of renewed USD weakness, continuing to show just how fast things have turned around in currency markets.
“GBP/USD rises to 1.3450 area, closes in on multi-year high” – www.fxstreet.com/currencies/gbpusd
“EUR/USD climbs above 1.1300 on renewed USD weakness” – www.fxstreet.com/currencies/eurusd