Fundamental Comment

Pound drops on restrictions, dull UK economic data

Pound drops on restrictions, dull UK economic data

The British pound dropped for the first time in four days versus the U.S. dollar on Friday, amid possibility that corona restrictions in the U.K. may last unit the summer and after the release of dull economic reports. 

The GBPUSD pair traded lower at 1.3666, but still can lock its second straight weekly gain, where it touched its highest level since late April 2018 this week. 

Worries intensified as U.K. Prime Minister Boris Johnson has refused to exclude the probability that Covid restrictions could last into the summer, especially with the fast spread of the new corona strain. 

On the economic front, data released today from the U.K. showed that retail sales posted a record decline in 2020, as sales volume dipped 1.9% year-on-year, the biggest annual plunge on records, compared to 2019. 

On the monthly basis, retail sales soared 0.3% in December, following a 4.1% plummet in November, while analysts had called for a 1.4% rise. 

Another report indicated that the third lockdown in Britain weighed on business activity at the beginning of the new year, where the Composite PMI, including activities of both manufacturing and services, slipped to 40.6 in January from 50.4 in December and thereby relapsing into the contraction zone below the 50.0 mark. 

"A steep slump in business activity in January puts the locked-down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards,” said Chris Williamson, chief business economist at IHS Markit. 

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