- Pound (GBP) rose over 1% last week
- Retail sales fell -1.2% MoM
- Euro (EUR) inflation cooled to 5.3% in July
- German PPI data is due
The Pound Euro (GBP/EUR) exchange rate is falling after gains across last week. The pair rose +1% in the previous week, settling on Friday at €1.1715 and trading in a range between €1.1584 – €1.1732. At 06:35 UTC, GBP/EUR trades -0.09% at €1.1706.
The pound rallied 1% across the previous week after data showed record UK wage growth and stickier-than-expected core inflation, which remained unchanged at 6.9% year on year in July. The data points to further rate hikes from the Bank of England in order to tame consumer prices.
However, on Friday, data showed that retail sales also fell by more than expected in July as the unusually wet weather discouraged shoppers from hitting the high street. Bad weather combined with the increased cost of living meant food and clothes sales were sluggish. According to the Office of National Statistics, the volume of sales fell -1.2% month on month, worse than the -0.5% contraction expected by economists.
Today there is no high impacting UK economic data, leaving sentiment to influence the pound. Looking out across the week, business activity data, as measured by the PMIs will be released and could shed more light on the health of the UK economy and the chances of a recession.
The euro fell last week against the pound but managed to eek out a gain on Friday following eurozone inflation data. The data showed that inflation in the eurozone cooled to 5.3% year on year in July, in line with the preliminary reading and down from 5.5% in June and 6.1% in May.
Core inflation proved to be sticky, holding steady at 5.5% annually, unchanged from June. Services inflation ticked higher to 5.6% from 5.4%, which could be a potential worry for the ECB.
Today, attention remains on inflation with the release of German wholesale inflation (PPI), which is expected to fall -5.1% annually in July after rising 0.1% in June. PPI is expected to fall -0.2% on a monthly basis.
