GBP/USD: Fundamentals still tend to the downside

Multiple job concerns in the UK are set to limit any GBP/USD recovery attempt, in the opinion of FXStreet’s analyst Yohay Elam. The future of the furlough scheme and the US fiscal impasse are high on the agenda.

Key quotes

“While the UK unemployment rate remained at 3.9% in June – an impressively low level – jobless claims climbed by 94,400 in July, far above 10,000 projected. The government's furlough scheme has successfully kept workers attached to their jobs in these coronavirus times, yet it is set to expire in October, creating an ‘employment cliff’.”

“Markets advanced after President Donald Trump touted cutting capital gains tax – claiming it would boost jobs after previously saying it will not help the middle class. On the other hand, skepticism is growing about the president's previous economic moves – signing executive orders to stimulate the economy and stir up fiscal relief talks. Apart from doubts about the legality of the moves, it is unclear if his attempt to resume the payment of federal unemployment claims will work. Moreover, lawmakers have yet to agree on a new round of talks.” 

“Trump's comments on the trade deal have been shrugged off by markets. He said it ‘means very little’ to him, days before the US and Chinese negotiators meet to take stock of the deal. Any signs it could break down would hurt equities and boost the dollar.” 

“Second-quarter GDP figures are due out from the UK on Wednesday. Ahead of that publication, two independent figures have shown that consumption is back on track, providing some support for sterling. The British Retail Consortium has shown an increase of 4.3%  yearly in sales in July while Barclaycard said spending was down 2.6% yearly, both representing stability after the collapse during the lockdown.”