GBP/USD plunges to one-month low following abysmal UK retail sales figures

The pound continued to trend lower on Friday, after the UK reported a shock contraction in retail sales.

Sterling is trading in a narrow range so far this morning, with GBP/EUR muted at €1.1649 and GBP/USD flat at $1.3640. GBP/CAD is subdued at CA$1.75426, while GBP/AUD climb and GBP/NZD hold steady at AU$1.9069 and NZ$1.9948 respectively.

Looking ahead, will some disappointing PMI figures pile more pressure on the pound today?
 

What’s been happening?

The pound closed last week’s session on a sour note, following the publication of the UK’s latest retail sales figures.

Sterling slumped as Friday’s data revealed sales growth in the UK unexpectedly contracted by 2.5% in July, the sharpest plunge in sales since the start of the third lockdown in January, and coming in spite of the reopening of more of the UK economy.

The US dollar, meanwhile continued to go from strength to strength on Friday as coronavirus concerns, coupled with speculation the Federal Reserve could soon start tapering its stimulus, weighed heavily on market sentiment.

This left the euro mostly rangebound at the end of last week, as the single currency’s strong negative correlation with the US dollar, overshadowed a positive PPI print from Germany.
 

What’s coming up?

Turning to this week, the focus at the start of the session will be on the latest UK and Eurozone PMI releases.

First up will be the Eurozone figures, which are forecast to report that activity in the bloc’s private sector remained fairly robust in August, potentially lending some support to the euro this morning.

Preliminary figures from the UK meanwhile, are expected to show that growth in the all-important service sector slowed slightly this month, in spite of the reopening of more of the UK economy, and as a result we could see the pound extend its losses into today’s session.

For USD investors the spotlight this week will undoubtedly be on the Federal Reserve’s Jackson Hole Symposium. Will the Fed use the summit to offer a clear timetable for tapering its bond purchases, or will it prove to be a non-event?