Pound Drops to One-Month Low against US Dollar and Euro after UK Retail Sales Unexpectedly Contract

Pound (GBP) Subdued as Retail Sales Slump 

The Pound (GBP) hit a one-month low against the Euro (EUR) and struggled against many of its other peers on Friday after UK retail sales unexpectedly contracted by 2.5% in July. 

Adding to the Pound’s headwinds was another rise in UK Covid cases, with deaths and hospitalisations also increasing, denting the optimistic outlook that has supported Sterling in recent weeks. 

Turning to today, the flash PMIs later this morning are expected to drop from last month’s levels. After last week’s poor data, Sterling could be particularly sensitive to any surprise results. 

Euro (EUR) Flat despite German PPI 

The Euro (EUR) was muted through Friday’s European session, despite Germany’s producer price index (PPI) printing at 1.9%, well over the 0.8% expected. 

As an indicator of inflation, the PPI may have failed to impress EUR investors as low base effects due to the pandemic and a temporary VAT cut started pushing up German prices last month. 

Looking ahead, the Euro may find some gains this morning as the Eurozone’s PMIs are forecast to come in higher than the UK’s. 

US Dollar (USD) Rangebound amid Lack of Data 

The US Dollar (USD) traded in a narrow range on Friday, as a lack of significant US data left the ‘Greenback’ without a clear directional bias. 

Despite a rather quiet day, USD managed to hold its high ground, sustaining levels close to a one-month high against the Pound and a nine-month high against the Euro. 

Today, the US Markit PMIs are also out. The US Dollar’s performance could depend on how the US PMIs stack up against those of the UK and the Eurozone. 

Canadian Dollar (CAD) Rebounds on Rising Oil and Good Retail Sales 

The Canadian Dollar (CAD) rallied on Friday afternoon, as oil prices made a small recovery and Canadian retail sales climbed by 4.2% in Jun. 

With no Canadian data out today, oil prices might continue to drive most movement in the commodity-linked currency. 

Australian Dollar (AUD) Firms as Risk Sentiment Improves 

After appearing to bottom out on Friday, the Australian Dollar (AUD) opens this week on stronger footing as a more risk-friendly environment boosts the appeal of the ‘Aussie’. 

New Zealand Dollar (NZD) Buoyed by Upbeat Mood 

The New Zealand Dollar (NZD) is also appreciating at the start of this week’s session, as modest risk appetite bolstered demand for the ‘Kiwi’ in overnight trade. 

Samuel Birnie

Contact Samuel Birnie