Pound see-saws on mixed data

The pound fluctuated at the end of last week in response to some mixed UK economic data

Sterling is flat at the start of this week’s session, with GBP/EUR subdued at €1.1816, and GBP/USD stable at $1.2649. GBP/CAD is rangebound at CA$1.7315, while GBP/AUD and GBP/NZD hold steady at AU$1.9037 and NZ$2.0688, respectively.

Coming up, will an improvement in German business sentiment help to lift the euro today?

What’s been happening?

The pound initially jumped on Friday as GBP investors welcomed the publication of the UK’s latest retail sales figures.

UK retail sales grew 2.9% in May. Rebounding from an upwardly revised –1.8% and sailing past expectations for a more modest 1.5% expansion.

However, Sterling then swiftly relinquished its gains after the UK’s latest PMI figures reported an unexpected slowdown in service sector growth this month.

The publication of the Eurozone’s own PMIs also acted as a headwind for the euro at the end of last week’s session.

June’s preliminary figures signalled the bloc’s economic recovery appears to be faltering, with service sector growth slowing and the contraction in the manufacturing sector deepening.

Meanwhile, the US dollar rallied on Friday, with the currency initially rising in tandem with US Treasury yields.

USD demand then accelerated with the publication of the US S&P PMIs, after they reported a surprise acceleration of US private sector growth this month.

What’s coming up?

Turning to this week, the only notable data at the start of the session will be Germany’s latest IFO business climate index.

Economists forecast business sentiment in the Eurozone’s largest economy will have continued to improve this month, potentially propelling the euro higher.

Meanwhile, in the absence of any UK data the focus for GBP investors may turn to the UK’s upcoming election as we enter the last full week of campaigning. Could any last-minute surprises spark some volatility in the pound?

US economic data is also in short supply today, potentially leading movement in the US dollar to be driven primary by market risk dynamics. Will a cautious mood see the US dollar maintain a positive trajectory at the start of the week?