GBP/USD: UK Retail Sales
  • Pound (GBP) eases back from 23 month high
  • UK retail sales due to fall in December
  • Euro (EUR) fell yesterday on dovish ECB
  • ECB policy makers to speak

The Pound Euro (GBP/EUR) exchange rate is edging lower on the final trading dat of the week, paring gains from the previous session. The pair rose + 0.18% on Thursday, settling at €1.2016 after reaching €1.2043 earlier in the session, a fresh almost two year high. At 05:45 UTC, GBP/EUR trades -0.11% at €1.2004. The pair is on track to gain 0.25% across the week, marking the seventh consecutive week of gains.

The Pound pushed higher in the previous session after the British economy showed signs of strengthening as the latest wave of Omicron eased and after business suffered a slowdown in December.

Economists now expect that the UK economy lost around 0.5% over December and January owing to the jump in Omicron cases which caused widespread staff absences.

However, there are more signs that economic activity is picking up at again. Consumer spending on credit cards increased to 85% of its pre-pandemic level in the week to January 13.  Meanwhile, restaurant reservations also picked up to 93% of their pre-pandemic level.

Attention today will turn to UK retail sales data, which is expected to rise 3.4% year on year in December, down from 4.7% in November. On a monthly basis sales are forecast to decline -0.6% after jumping 1.4% in the previous session as Omicron concerns kept shoppers away.

The Euro came under pressure in the previous session, despite German producer price inflation rising to 24.4% year on year in December, its faster annual pace in history. Energy prices were the main contributor to increases. The high inflation at wholesale level suggests that consumer prices could still rise further.

However, the minutes from the latest European Central Bank meeting revealed that the central bank remains cautious over tightening policy too quickly and still considerers elevated inflation to be temporary.

ECB President Christine Lagarde warned that rising interest rate too quickly would slow growth. Eurozone consumer price growth rose to 5% in December. However, Christine Lagarde said that she believes it will fall back below target by the end of the year.

There is no high impacting Eurozone data due today. However, ECB policy makers will be in focus once again with speeches from Lagarde and Fernandex-Bello due.