U.S. dollar sales take a breather | 19 July 2024

GBPUSD:

The GBP/USD currency pair retreated below the pivotal 1.3000 level on Thursday, as the US dollar short position eased. Following a strong rally at the start of the trading week, investors are taking a moment to assess the market after expectations of a Federal Reserve (Fed) rate cut reached a ceiling.

On Thursday, UK data was released and largely met expectations, with jobless claims coming in slightly better than anticipated but still down. Meanwhile, initial jobless claims in the US increased as markets anticipated a rate cut and identified new indications of a deceleration. This will facilitate the Fed's decision to implement a rate cut in September.

The week will conclude for those trading the pound with the release of the UK retail sales data for June on Friday. Analysts anticipate a 0.4% decline in retail sales for the month, following a 2.9% increase in the previous month. Additionally, year-on-year retail sales growth is projected to decelerate significantly to 0.2%, down from the previous figure of 1.3%.

On Thursday, the number of initial unemployment benefit applications in the United States increased by a greater amount than had been anticipated. The number of new claims for unemployment benefits for the week ending 12 July totalled 243 thousand, exceeding the projected 230 thousand and surpassing the revised figure for the previous week of 223 thousand. In light of the recent softening of labour market data, expectations of a rate cut in September are likely to intensify. However, the likelihood of a Fed rate cut is already high, with markets anticipating a quarter-point reduction by the Federal Open Market Committee (FOMC) on 18 September.

In the UK, average earnings were released in line with expectations, while the June change in jobless claims fell to 32.3k from the previous revised 51.9k.

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