GBP/USD – Pound slips to 3-month low despite soft U.S. retail sales

GBP/USD has posted considerable losses on Wednesday, as the pound continues to slide. In the North American session, the pair is trading at 1.2845, down 0.47% on the day. On the release front, there are no British events. In the U.S., consumer spending numbers disappointed, as retail sales and core retail sales both missed expectations. On Thursday, the U.S. releases three key indicators – building permits, unemployment claims and the Philly Fed Manufacturing Index.

U.S. retail sales in April were weaker than forecast, but this didn’t help the struggling pound. The currency has lost 1.2% this week and is trading at its lowest level since mid-February. Retail sales declined 0.2%, after a strong gain of 1.6% in March. Core retail sales posted a small gain of 0.1%, much lower than the estimate of 0.7%.

Brexit has been on the backburner for several weeks, but will be back on center stage in early June. Parliament is expected to vote yet again on a Brexit withdrawal agreement, after three previous attempts by the May government ended in failure. It’s difficult to see why the result will be any different this time around, as Conservative lawmakers remain deeply divided on Brexit. May tried to enlist the help of Labor leader Jeremy Corbyn, but these talks have been unproductive. The next Brexit vote in parliament will be May’s last chance before the summer recess, and her days as prime minister may be numbered.

The pound remains under pressure, and the uncertainty surrounding Brexit and global trade tensions are making fund managers increasingly pessimistic over the pound. Major financial services companies are reducing their exposure to the pound, with some going further and shorting the currency. The May government has been unable to present the public with a clear roadmap for departing the EU, and a no-deal remains a possibility, although both the EU and Britain are in agreement that a no-deal exit would be disastrous. Given the turmoil over Brexit, the pound is likely to face further headwinds in the coming weeks.