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Pound subdued following shock contraction in UK retail sales

currency-newsPound subdued following shock contraction in UK retail sales
The pound struggled to attract support at the end of last week as GBP investors were left dismayed by the UK’s latest retail sales figures.

Sterling is wavering this morning, with GBP/EUR muted at €1.1998 and GBP/USD retreating to $1.3151. GBP/CAD and GBP/NZD are rangebound at C$1.6427 and NZ$1.8954, respectively, while GBP/AUD slips to AU$1.7497.

Coming up, will a quiet data calendar result in Ukraine developments dominating currency movements today?


What’s been happening?

The pound was left mostly rangebound on Friday after initially taking a hit in the wake of the UK’s latest retail sales data.

February’s data reported an unexpected 0.3% contraction in sales growth, down from a 1.9% expansion in January and stoking concerns that the UK’s cost-of-living crisis is already starting to impact consumer spending.

Meanwhile, the publication of Germany’s IFO business climate index, sent the euro reeling at the end of last week, as business morale deteriorated at a much faster-than-expected pace this month as a result of the outbreak of war in Eastern Europe, concerns over which also exerted pressure on the single currency.

Finally, the US dollar was buoyed by Federal Reserve rate hike speculation as USD investors started to price in expectations rates could rise by up to 200 basis points this year.

However, the ‘greenback’s gains were capped somewhat after the University of Michigan revised its March consumer sentiment index even lower.

What’s coming up?

Turning to start of this week’s session, in the absence of any notable data we are likely to see the Ukraine crisis act as a key catalyst of movement in the currency market.

Later in the week the focus for EUR investors will be on the Eurozone’s consumer price index. Will another jump in inflation be seen as placing more pressure on the European Central Bank (ECB) to start hiking interest rates this year and bolster the euro in the process?

Meanwhile, the pound may face an uphill battle this week as the UK’s cost-of-living crisis is likely to continue to weigh on Sterling sentiment.

Across the pond the spotlight will be on the latest US payroll release, with the US dollar potentially strengthening if the US economy continues to add jobs at a robust pace.
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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