British Pound Subdued in Data-Light Session

Fundamental analysis of Forex market

GBP/USD is flat in the Thursday session. Currently, GBP/USD is trading at 1.2685, down 0.03% on the day. On the release front, U.S. unemployment claims was unexpectedly high, climbing to 222 thousand. This was the highest reading in five weeks. There are no British events on the schedule. On Friday, the U.S. releases retail sales and consumer confidence reports.

In the U.K., the race is on to replace Prime Minister Theresa May, who will step down in August. Boris Johnson, the former foreign minister, is favored to win the leadership race, but he will have to beat out seven other candidates. Earlier this week, Johnson said that the U.K. should leave the European Union as scheduled on October 31, with or without a deal in place. Johnson is known for his hard-line approach towards the EU, and if he becomes prime minister, relations could fray even further with the EU, which could hurt the British pound.

As expected, consumer inflation in the U.S. remained soft in May. CPI slowed to 0.1%, down from 0.3% in the previous release. This matched the estimate. The core reading posted a gain of 0.1% for a fourth straight month, shy of the forecast of 0.2%. With the May inflation numbers remaining low, there could be more pressure on the Fed to lower interest rates in order to boost economic activity and inflation. The likelihood of further rates this year is increasing – the CME Group has set the odds of a July cut at 66% and another cut in September at 50%. Lower interest rates make the U.S. dollar less attractive to investors, so investors will be keeping an eye on alternative assets.

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