Pound tumbles as UK December retail stats fare worse than expected

The pound took a hit on Friday after the latest UK retail figures proved disappointing.

The pound starts the week on the rebound, with GBP/EUR up 0.1% to €1.1346, while GBP/USD is up 0.3% to US$1.3893. GBP/AUD is up 0.3% to AU$1.7366, GBP/NZD up 0.2% to NZ$1.9051, and GBP/CAD up 0.1% to C$1.7320.

There is nothing of interest on the economic data calendar today from the UK, Eurozone, or United States. Read on to see what long-term concerns could be driving GBP, EUR, and USD today…

What’s been happening?

A much worse than expected set of UK retail sales figures from December sent the pound slumping on Friday, although Sterling was able to recover much of the day’s losses against the euro by the time trading ended.

Sales excluding auto fuel declined -1.6% month-on-month, compared to forecasts of -1%, while sales including fuel dropped -1.5% instead of the expected -0.9%.

This dragged the year-on-year growth rate down to half its expected level, while the previous month’s growth rates were also cut.

Eurozone data was rather lacking, although what figures were released proved generally supportive, with the German producer price index showing the expected month-on-month acceleration from 0.1% to 0.2%.

The latest Eurozone current account figures showed a widening surplus in November, although October’s balance was revised downward.

However, recent comments from European central bankers regarding the strength of the euro saw it give back some of its gains later in the day, allowing the pound some respite.

A poor performance from the University of Michigan sentiment index for January failed to prevent GBP/USD from tumbling.

The index was expected to rise from 95.9 to 97, but instead weakened to 94.4.

What's coming up?

The data calendar is incredibly sparse today, which could leave traders considering the long-term risks to the pound, euro, and US dollar.

Any comments relating to Brexit would give the pound fresh impetus, while the euro may be sensitive to developments regarding the German coalition talks between Angela Merkel’s CDU and their former grand coalition partners the SPD.

As we’ve just marked a year of President Donald Trump, markets may be reassessing his campaign pledges and the events of the past 12 months and readjusting their bets for the outlook of the US economy – especially given that the government is now shutdown due to a deadlock in Congress over funding.

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.