Pound Tumbles as Cost-of-Living Crisis Hits Retail Sales

Pound (GBP) Plunges as Income Squeeze Begins to Choke UK Economy 

The Pound (GBP) fell sharply on Friday after UK retail sales contracted by 1.4% in March, much worse than the expected 0.3% contraction. 

This, along with a larger-than-forecast drop in the UK services PMI, raised concerns about the UK’s cost-of-living crisis. The squeeze on incomes now seems to be having a tangible impact on the UK economy

Some new data from the Confederation of British Industry (CBI) may affect the Pound later this morning. In particular, the CBI’s quarterly business confidence index could cause headwinds. Consensus estimates see the gauge slumping to its worst level since the Covid pandemic first hit. 

Euro (EUR) Climbs as PMI Boosts Rate Hike Bets 

The Euro (EUR) firmed against the majority of its peers on Friday after Eurozone growth unexpectedly picked up in April. The latest flash PMIs saw an uptick in overall business activity, driven by a strong service-sector recovery. 

Although the survey came with some caveats, economists believe that the strong results could push the European Central Bank (ECB) in a more hawkish direction. As a result, EUR exchange rates rose. 

This morning, the latest Ifo business climate indicator for Germany could dent EUR. Forecasters expect another drop in business morale as stagflation fears darken the economic horizon. 

US Dollar (USD) Firms amid Hawkish Fed Tailwinds 

The US Dollar (USD) strengthened on Friday as hawkish comments from Federal Reserve Chair Jerome Powell on Thursday continued to provide a tailwind. 

Furthermore, a risk-off mood helped boost the appeal of the safe-haven currency. 

During today’s session, a lack of notable US data may mean the ‘Greenback’ trades primarily on risk sentiment. 

Canadian Dollar (CAD) Slips on Weaker Oil and Sales Slowdown 

The commodity-linked Canadian Dollar (CAD) dipped on Friday as a decline in crude prices hurt the currency. 

Better-then-expected retail sales data did little to lift CAD. Sales growth printed at 0.1% in February, above forecasts of -0.4%. However, this is still near stagnation and a sharp slowdown from January’s 3.3% growth. 

Amid a lack of market-moving Canadian data today, events in the oil market may drive the ‘Loonie’. 

Australian Dollar (AUD) Down on China Lockdown Fears

The China-proxy Australian Dollar (AUD) fell in overnight trade as China’s battle to contain Covid outbreaks continues. Investors are worried that new lockdown measures could hurt the country’s economy.

New Zealand Dollar (NZD) Softens amid Risk-Averse Mood

The New Zealand Dollar (NZD) also dropped overnight as fears of fresh lockdowns in China weighed on the market mood, thereby denting the risk-sensitive ‘Kiwi’.

Samuel Birnie

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