GBP/USD: The deck is stacked against cable

UK past could have been worse but the bleak labor market prospects and dollar’s haven flows point to falls, according to FXStreet’s analyst Yohay Elam. GBP/USD is flat, trading just below the 1.3050 level.

Key quotes

“The UK economy shrank by 20.4% in the second quarter of 2020, better than -20.5% projected. YoY, output fell by 21.7%, also above estimates. Perhaps the truly encouraging figure is June's monthly rebound of 8.7%, not only topping forecasts but showing that Britain's gradual reopening also bears economic fruits. That recovery, accompanied by hopes that the uptrend continues in July and beyond, pushed the pound higher.”

“Chancellor Rishi Sunk is sending sterling lower once again. Apart from reiterating that the furlough scheme is unsustainable, he added that many will lose their jobs.”

“The greenback is benefiting from higher bond yields as the US issues a record amount of debt that investors are unable to absorb at low returns. The world´s reserve currency is also benefiting from safe-haven flows originating from the impasse on US fiscal stimulus and Sino-American tensions ahead of trade talks.”

“Investors are skeptical about Russia's announcement that it developed a COVID-19 vaccine and more worried that Texas will be keeping restrictions in place despite some improvement in battling the disease.”