- Cable remains downward pressured amidst disappointing data and Strong USD.
- Dismal market mood and flight to safe-haven assets weighed on the GBP.
- Signs of the UK economy is under stress from soaring inflation puts pressure on the GBP.
The British pound plummeted against the US dollar during Tuesday trading session due to the fears about the economic impact of China’s COVID-19 lockdowns and an aggressive pace of U.S. rate hikes sent investors rush towards safe- haven assets.
China’s Covid-19 outbreak over the last two weeks in Shanghai threatens to extend to Beijing, as reported by Reuters. Shanghai has now been under strict lockdown to fight COVID for about a month, and a Beijing official said late on Monday that a mass-testing campaign there will be expanded from the city’s most populous district to another 10 districts and one economic development area.
Meanwhile, Hawkish comments by various policymakers last week also raised the risks of aggressive interest rate policy tightening by global central banks. The most significant is of the US Fed, markets is pricing at half point rate hike at each of its next two meetings.
Additionally, Disappointing data further weighs on the cable. The Office for National Statistics reported on Friday that UK Retail Sales volumes fell 1.4% MoM in March and suggested that the expected consumption drag from high inflation might have arrived already. A worse than expected April’s Gfk Consumer Sentiment (at -38 ) kept the cable under pressure, hitting its lowest level since the Global Financial Crisis (GFC) of 2008. It is worth noting that a GfK Consumer Sentiment reading has preceded four of the last five recessions in the UK.
GBP/USD 4 Hour Chart: