GBP/EUR slumps to new five-month low on abysmal UK retail sales
Philip McHugh October 23rd 2023 - 2 minute read
The pound stumbled on Friday as GBP investors were left disappointed by the UK’s latest retail sales figures.
Sterling is stable at the start of this week, with GBP/EUR flat at €1.1488 and GBP/USD muted at $1.2164. GBP/CAD is rangebound at CA$1.6691, while GBP/AUD and GBP/NZD hold steady at AU$1.9283 and NZ$2.0886, respectively.
Looking ahead, will ongoing concerns over the situation in the Middle East infuse volatility into the currency market at the start of this week.
What’s been happening?
The pound closed last week’s session on the defensive, with the GBP/EUR exchange rate even sliding to a new five-month low.
Sterling’s losses came in response to the UK’s latest retail sales data, as September’s figures reported that sales growth contracted 0.9%, against forecasts for a more modest 0.2% decline.
The startling slump in sales revived UK recession fears and undermined Bank of England (BoE) interest rate expectations.
Meanwhile, the euro initially faced some resistance on Friday amid a surprise drop in Germany’s latest producer price index. Before EUR exchange rates rebounded later in the session as a cautious mood buoyed demand for the single currency.
These risk-off flows also helped to underpin the safe-haven US dollar at the end of last week. However, USD’s gains proved limited as the ‘greenback’ was simultaneously undermined by a drop in US Treasury yields.
What’s coming up?
Turning to this week, the absence of any notable data at the start of the session is likely to leave movement in the currency market driven primarily by geopolitics.
This may leave the US dollar in demand as the ongoing Israel-Hamas conflict continues to unsettle investors.
In contrast a cautious mood may see investors shy away from the increasingly risk-sensitive pound.
Meanwhile movement in the euro may be limited in the first half of the week, with EUR investors likely to be reluctant to reposition ahead of the European Central Bank’s (ECB) impending interest rate decision.
Written by
Philip McHugh