GBP/USD nears three-month low as Brexit uncertainty offsets upbeat retail sales

The pound continued retreating on Thursday, with lingering Brexit jitters overshadowing the UK’s stronger-than-expected retail sales figures.

Sterling appears to have stabilised this morning however, with GBP/EUR steady at €1.1938, GBP/USD flat at $1.2885 and GBP/CAD rangebound at C$1.7092. GBP/AUD and GBP/NZD are both trending higher again, striking AU$1.9562 and NZ$2.0439 respectively.

Coming up, the publication of the UK’s latest PMI figures could help inject some life into GBP exchange rates this morning if private sector growth continued impressing in February.

What’s been happening?            
                                                                          
The pound extended its downtrend yesterday, suffering its second consecutive sell-off in spite of some upbeat economic data.

The Office for National Statistics (ONS) reported that domestic retail sales spiked by 0.9% in January, rocketing up from a 0.5% contraction in December and striking their highest levels since March last year.

However, the surge in sales growth failed to offset growing concerns over Brexit, with GBP investors increasingly worried about clashes between the UK and EU when trade negotiations get underway next month.

Meanwhile, the euro firmed on Thursday with the release of the latest minutes from the European Central Bank (ECB) as policymakers see growth remaining positive in the near-term.

The US dollar also strengthened yesterday, with the ‘greenback’ extending its bullish run amid a risk-off mood in markets and a sharp rise in the Philadelphia manufacturing index in February.

What’s coming up?

Looking ahead, the main draw today will be the latest flash PMI estimates for both the UK and Eurozone.

In terms of the UK reading, GBP investors will be eager to see if the private sector was able to sustain the post-election rebound seen at the start of the year, with the pound potentially finding some relief if it appears the recovery has legs.

On the continent, the PMI release may prove a little gloomier, with the euro set to weaken if growth in the Eurozone’s private sector slowed as expected this month.

Closing out the week will be a slew of speeches from Federal Reserve policymakers later this afternoon, with the US dollar likely to extend gains even further if they appear upbeat in their outlook for the US economy.