Pound weakened by disappointing UK retail sales

The pound stumbled on Friday as GBP investors were spooked by a surprisingly sharp slump in UK retail sales.

Sterling is holding in a narrow range so far this morning, with GBP/EUR subdued at €1.1698 and GBP/USD flat at $1.2738. GBP/CAD is rangebound at CA$1.7237, while GBP/AUD and GBP/NZD hold steady at AU$1.9889 and NZ$2.1520, respectively.

Looking ahead, will another slump in German PPI lead the euro to weaken today?

What’s been happening?

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

Data published by the Office for National Statistics (ONS) reported UK sales growth declined 1.2% in July. This was down from a 0.6% expansion in June and larger than the 0.5% contraction that had been forecast.

Sterling weakened as analysts warned the particularly sharp slump in consumer spending could be another sign of cooling growth.

The US dollar firmed on Friday. Growing concern over the state of China’s economy led skittish investors to favour the safe-haven currency.

However, these gains were very modest in scope, as USD demand was tempered by softening US Treasury yields.

Finally, in the absence of any impactful data the euro was left to trade sideways at the end of last week’s session.

What’s coming up?

The only data release of note at the start of this week was the publication of Germany’s latest producer price index earlier this morning.

July’s PPI figures are sapping EUR sentiment after reporting prices plunged 1.1%, versus forecasts for a modest 0.2% contraction.

In the absence of any UK data, the pound may struggle to find momentum today, and could be vulnerable to losses if market sentiment weakens.

At the same time, any movement in the US dollar may be limited through the first half of this week as USD investors await the start of the Federal Reserve’s annual Jackson Hole Symposium on Wednesday. Markets will be hoping it will shed more light on the Fed’s plans for monetary policy.