GBP/USD: Both US & UK Retail Sales Impress
  • Pound (GBP) drops as retail sales fall
  • BoE rate decision due next week
  • Euro (EUR) rises versus GBP but falls versus USD
  • Eurozone inflation data due

The Pound Euro (GBP/EUR) exchange rate is falling for a second straight session. The pair settled -0.8% lower yesterday at €1.1459, after trading in a range between €1.1464 – €1.1576 across the session. At 05:45 UTC, GBP/EUR trades -0.4% at €1.1409. The pair is set to fall 1% across the week, its third straight week of losses.

The pound tumbled in the previous session as concerns continued to grow over the outlook of the UK economy. According to the latest YouGov consumer confidence index, sentiment fell to its weakest level since the pandemic in 2020.

The data came ahead of today’s retail sales figures which showed that sales collapsed in August. Retail sales dropped -1.6% month on month as the worsening cost of the living crisis meant consumers spent less. Sales were expected to fall a more modest -0.3% month on month.

The data raises concerns over the state of the UK economy, which looks increasingly likely to have contracted in the third quarter.

The Bank of England will be watching the figures closely ahead of next week’s monetary policy meeting, where the central bank is expected to hike interest rates by 50 or 75 basis points. However, given the weakness seen in the consumer a 50-basis point hike could be more likely.

The euro is holding firm against the pound but is falling against the USD amid a deep risk off mood in the market. Attention is turning to eurozone inflation data, the second reading, which is expected to confirm the record-high reading of 9.1% year on year.

The data comes after some European Central Bank policymakers have sounded slightly less hawkish recently, suggesting that a slower pace of rate hikes could be appropriate after a jumbo rate hike in September.

With regards to the ongoing energy crisis in Europe, Norway has said that it is will to negotiate with Europe to help resolve the energy crisis.