Rising UK retail sales could spur pound gains

Philip McHugh February 25th 2020 - 2 minute read

  • Pound softens as France casts doubt over UK-EU trade agreement
  • Latest bout of market risk aversion boosts US dollar
  • Stronger German business expectations shore up euro

Stronger retail sales growth could boost GBP
Fresh worries over the risk of the Brexit transition period ending without a trade agreement between the UK and EU dragged on the pound yesterday.
Comments from a key French official indicated that the country is unwilling to sign a deal simply to meet the current deadline, upping the odds of a potential cliff-edge scenario.
The mood towards the pound could improve this morning, however, as February’s CBI reported retail sales index looks set to deliver a solid rebound on the month.
Evidence of resilient domestic spending may encourage GBP exchange rates to push higher once again as hopes of a stronger first quarter growth rate improve.
US dollar to extend gains on consumer confidence uptick
Renewed fears surrounding Covid-19 and its impact on the global economy helped lift the US dollar higher across the board yesterday.
With outbreaks in Italy, Iran and South Korea reigniting market worries over the virus, a sharp increase in safe-haven demand pushed USD exchange rates into an uptrend.
This afternoon’s consumer confidence index could help improve confidence in the underlying health of the world’s largest economy and support USD.
Growing anxiety over Covid-19 caps euro gains 
An unexpectedly improved German IFO business expectations index encouraged the euro to gain some ground yesterday.
While doubts over the outlook of the Eurozone’s powerhouse economy remain, given the ongoing global slowdown, EUR exchange rates still found support on the back of the data.
However, with northern Italy experiencing a major outbreak of Covid-19 a sense of anxiety could drag on the single currency in the near term.
With weaker global trade looking set to further inhibit the growth of the German economy the euro looks vulnerable to renewed selling pressure as long as market risk aversion lingers.
Upcoming Data:
Tuesday, 25th February 2020
11:00 GBP CBI Reported Retail Sales
15:00 USD Consumer Price Index

Written by
Philip McHugh

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