- Pound (GBP) looks to retail sales data
- Sales are set to fall -2.1%
- Euro (EUR) looks to inflation data
- ECB’s Philip Lane to speak
The Pound Euro (GBP/EUR) exchange rate is falling after 5 straight days of gains. The pair rose +0.17% in the previous session, settling on Thursday at €1.1720 and trading in a range between €1.1684 – €1.1734. At 07:35 UTC, GBP/EUR trades -0.12% at €1.1706.
The pound has risen firmly this week, boosted by bets that the Bank of England will continue hiking interest rates when policymakers meet in September. While inflation is showing signs of moving in the right direction, core inflation remains very sticky.
Furthermore, with wages rising at a record pace and at a faster pace than inflation, the central bank will be nervous.
Attention now turns to UK retail sales data which is expected to show that sales fell -0.5% month on month in July, down from -0.5% in June. Falling retail sales come as inflation cools but interest rates have been lifted to the highest level since the financial crisis, keeping households squeezed.
Falling retail sales could raise fears that the BoE could hike interest rates too far and tip the UK economy into recession.
The euro fell against the pound and also dropped to its lowest level against the USD in 5 weeks. The eurozone economic calendar was relatively light, with no fundamental catalyst in the eurozone causing the weakness.
Today attention turns to eurozone inflation data for July, which economists expect to confirm the preliminary reading of 5.3% year on year, down from 5.5% June and 6.1% in May, marking the lowest level since early 2022.
On a monthly basis, consumer prices are expected to fall -0.1% after rising 0.3% in June.
Eurozone inflation is moving in the right direction as energy prices cool and the ECB hiked rates to tame inflation.
The ECB will meet again in September. Investors will look towards ECB Chief economist Philip Lane, who is due to speak, for clues over the likelihood of another rate hike from the central bank.