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GBP/USD tumbles to two-week low on abysmal UK retail sales

currency-newsGBP/USD tumbles to two-week low on abysmal UK retail sales
The pound came under some notable selling pressure on Friday in response to a lacklustre UK retail sales print.

Sterling is mostly rangebound at the start of this week’s session, with GBP/EUR stable at €1.1962 and GBP/USD muted at $1.3540. GBP/CAD is subdued at C$1.7022, while GBP/AUD and GBP/NZD hold steady at AU$1.8902 and NZ$2.0166, respectively.

Coming up, will some upbeat UK PMI releases help GBP exchange rates to recover at the start of this week’s session?

What’s been happening?

The pound limped over the finish line last week, as GBP investors were left dismayed by the UK’s latest retail sales reading.

Friday’s figures reported sales growth contracted a whopping 3.7% in December, while growth in November was revised down from 1.4% to 1%. The disappointing figures revived fears the UK economy may have shrunk at the end of 2021.

Meanwhile, the US dollar came under some modest pressure on Friday as retreating US Treasury yields sapped demand for the ‘greenback’ in spite of a prevailing risk-off mood.

The dip in USD exchange rates helped to firm up support for the euro thanks to the negative correlation between the pairing. 

What’s coming up?

Looking ahead, the focus at the start of this week will be on the latest PMI releases from the UK and Eurozone.

The former could help the pound get off to a strong start this week, amidst hopes easing Omicron concerns will have revived consumer confidence this month and translated into an uptick in activity in the UK’s private sector.

Meanwhile, the euro’s outlook looks a little ropier as the Eurozone’s latest PMI releases may report economic growth in the bloc remained suppressed as Covid cases in many Eurozone countries climbed to new record highs throughout January.

The release of the US Markit PMI - while not as influential as the ISM releases - could also drive movement in the US dollar this afternoon, with a softening of service sector growth potentially weakening USD exchange rates.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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