Pound slips on disappointing UK retail sales print

The pound trended lower on Friday, in response to lacklustre retail sales data from the UK.

Sterling appears to have stabilised so far this morning, with GBP/EUR steady at €1.1865 and GBP/USD flat at $1.2919. GBP/CAD is rangebound at CA$1.7747, while GBP/AUD and GBP/NZD are buoyed at AU$1.9381 and NZ$2.1525, respectively.

Looking ahead, will the absence of any notable economic data limit volatility in the currency market at the start of this week?

What’s been happening?

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

The Office for National Statistics (ONS) reported sales growth plummeted by 1.2% in June. This was a marked fall from the bumper 2.9% expansion seen in May and below forecasts for a modest 0.4% contraction.

Sterling sentiment softened as analysts warned that lacklustre consumer spending may have been a drag on UK GDP in the second quarter.

In contrast, the US dollar strengthened on Friday as a cautions market mood and an uptick in US Treasury yields bolstered the appeal of the safe-haven currency.

However, these gains were tempered towards the end of the session, following dovish comments from Federal Reserve policymaker John Williams.

At the same time, the euro stumbled at the end of last week, in response to comments from European Central Bank (ECB) policymakers Francois Villeroy de Galhau and Gediminas Simkus.

In separate remarks, the pair both suggested the ECB would pursue at least two more interest rate cuts in 2024, reinforcing bets the bank will cut rates in September and December.

What’s coming up?

Turning to the start of this week, the spotlight will be on US political developments, following Joe Biden’s decision to withdraw from the presidential race.

Several top Democrats have already come out in support for Vice President Kamala Harris to be the party’s new presidential nominee. However there remains a degree of uncertainty surrounding the last-minute switch, which could infuse some volatility into the US dollar today.

Meanwhile, economic data from both the UK and Eurozone is in short supply today, which may leave both the pound and euro to trade sideways.