The GBP/USD rate has broken back below the 1.2000 level. In the view of economists at MUFG Bank, GBP downside risks persist despite better sales data. 

Downside risks persist

“A recent build-up of long GBP positioning by Leveraged Funds could be vulnerable to liquidation propelling GBP/USD lower still.”

“Instead of the expected modest MoM declines, overall sales increased 0.3% and excluding auto fuel gained 0.4%. The data doesn’t change the overall picture of weak consumer spending. The ex-auto sales print gained 0.2% in June as well but these modest gains were preceded by seven consecutive declines and the record temperatures in the UK in July were very likely a driver of increased sales.”

“We doubt the retail sales data will change the dial on investors’ expectations of the outlook for the UK economy and see this break lower in GBP/USD extending further to the downside over the coming weeks.”