Last week, the British Pound was on track to finish the week severely lower against the US dollar on Friday, forced by weak UK economic data, soaring U.S. bond yields and some risk-off sentiment. Through New York afternoon market hours, the Cable was down 1.44% to 1.284 on the day and off 1.68% over the past five sessions, trading at lows not seen since September 2020.
Numerous UK reports on Friday morning, including retail sales, manufacturing output and services sector activity for March, surprised on the downside, a telltale that the recovery is hesitating and that the economy is starting the second quarter on a weaker footing as surging price pressures curtail demand.
Looking ahead, there is not much to be optimistic about sterling. The growing probability that the UK economy will contract in the second quarter and that the BoE’s normalization cycle will underwhelm expectations may keep GBP/USD subdued or prompt the next leg lower in the exchange rate.
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