The negative fundamental factors are further stacking up against GBP, which have again started to weigh on the currency.
On Friday, British retail sales plummeted by a record amount in April, contracting a whopping 18%, with many stores closed amid the coronavirus outbreak. Separately, Britain’s government borrowed more in April than it has in any month on record, seeing the public debt being driven close to 100% of gross domestic product, the highest since 1963.
The data is just adding to the overall lack of good news for GBP, with other key underlying themes forcing deterioration of the currency. There is large uncertainty with Brexit negotiations, which remain at a stalemate, with no sign of progress being made between both EU and UK officials.
Furthermore, given the delicacy of the current UK economic conditions and outlook, several Bank of England members have expressed their openness to negative interest rates. As a reminder, a central bank cutting rates naturally decreases the value of the respective currency, with negative interest rates, this is a highly dovish (negative) move.
What does this mean for GBP?
Initially in the latest week GBP had been enjoying some upside pressure, as thanks to the risk appetite that was observed through most of the week. However, a change in tone came into play given the ongoing U.S. and China bickering. Given all of the above-noted fundamental points, we still believe in our view that GBP rallies will remain subject to being sold