Pound recovery slows following disappointing UK retail data

The pound shrugged off poor retail data yesterday to post modest gains versus its peers.

Sterling has fallen by around -0.2% versus its major peers this morning however, in response to a potential crisis in government. GBP/EUR has fallen to €1.1329, GBP/USD is down to US$1.3142. GBP/AUD is trending at A$1.7160, GBP/NZD at NZ$1.9028, and GBP/CAD at C$1.6774.

Read on to find out about the latest chaos in government that could threaten to keep the pound on a downtrend today…

What’s been happening?

Sterling was on unsteady ground yesterday, though overall the pound was able to end the day higher versus many of its peers.

Encouraging housing market data showed that property price growth did not slow quite as much on the month as expected, weakening from 0.8% to 0.3% instead of to 0.2%. This was a cheering sign, given that the housing market has recently been sending out worrying signals.

This helped GBP to shake off the negative impact of the morning’s early retail data from the British Retail Consortium (BRC). The report showed a -1% drop in retail sales during October, disappointing forecasts of a slowdown from 1.9% to 0.8%.

With the euro on soft form thanks to disappointing domestic data, the GBP/EUR exchange rate was able to creep higher yesterday.

German industrial production posted a much bigger contraction on the month than markets had expected, with output dropping -1.6% instead of the forecast -0.9%.

The Eurozone retail PMIs for October also largely pointed to slowing growth, which eclipsed a positive result from September’s retail sales figures as the freshness of the PMI data makes it more relevant.

While the US dollar was supported by solid odds of an interest rate hike next month, the weakened pound had much more potential for upwards appreciation, allowing GBP/USD to record some gains.

What's coming up?

It is a sparse day on the economic data calendar, with neither the UK, Eurozone, nor US releasing any notable reports.

This is likely to see the pound, euro, and US dollar trending on their respective long-term outlooks. This may not favour the pound, as Prime Minister Theresa May is today facing pressure to sack two of her cabinet members - and two pro-Brexit ones at that.

Tory MPs want Boris Johnson fired after the Foreign Secretary made a ‘slip of the tongue’ that could see a British journalist currently jailed in Iran receiving double her sentence. Meanwhile, Secretary of State for International Development Priti Patel is in trouble for holding unofficial meetings during a visit to Israel.

The euro could continue to soften throughout the day as markets continue to assess the impact of yesterday’s poor data on the odds of the European Central Bank (ECB) taking more action on monetary policy.

Meanwhile the US dollar is likely to remain stuck in a narrow range as the presence of a rate hike next month limits the potential for both upside and downside movement.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.