Pound stumbles following slump in sales

The pound extended its recent selloff yesterday after new data revealed a sharp decline in UK retail trade in August, adding to growing worries about the British economy.

So far today, Sterling is subdued. GBP/EUR and GBP/USD are wavering near recent lows at €1.1659 and $1.2577, respectively. Meanwhile, GBP/CAD is also muted at CA$1.7093, while GBP/AUD has fallen to AU$1.9589 and GBP/NZD has crept higher to NZ$2.1281.

All eyes are firmly fixed on the Federal Reserve’s Jackson Hole Symposium today, with Fed Chair Jerome Powell and European Central Bank (ECB) President Christine Lagarde due to speak. Could a dovish tilt to their comments see USD and EUR slide?

What’s been happening?

The pound fell yesterday after weak retail data added to recent concerns about the health of the UK economy.

The Confederation of British Industry’s (CBI) distributive trades survey showed that retail trade slumped at its fastest pace in over two years this month. Following Wednesday’s dire PMIs, this new data dented GBP.

Meanwhile, the US dollar rallied as US Treasury yields rose from their recent dip. Hawkish comments from former Fed official James Bullard and a surprise drop in US initial jobless claims both boosted USD demand.

The US dollar’s strength limited the euro’s upside potential, due to EUR’s negative correlation with USD. However, a souring mood saw the safer euro rise against its riskier peers.

What’s coming up?

Markets are bracing for two potentially impactful speeches later today, as the Fed and ECB chiefs take the stage for the Jackson Hole Symposium.

First up is Jerome Powell, head of the US central bank. Powell often uses the annual symposium to signal a shift in policy, and there is some speculation that recent economic data could see the Fed Chair strike a more cautious tone.

If so, USD could slide. However, a more hawkish stance from the Fed chief would likely see USD jump.

Similarly, dovish comments from the ECB’s Lagarde could hammer the euro. The Eurozone’s recent PMIs pointed to shrinking business activity, so Lagarde may hint at an end to further policy tightening.

As for the pound, a lack of UK economic data could see Sterling end the week without a clear direction.