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GBP declines following disappointing UK Retail Sales figures

Friday 25 March, 2022

Daily Currency Update

GBP/USD lost most of Thursday morning’s gains and retreated to below 1.3200 this morning in reaction to weaker UK macro data. UK Retail Sales figures fell unexpectedly in February, printing at -0.3% rather than 0.6%. The pound's decline was also supported by the Bank of England's softer view on the need for further interest rate hikes, which has acted as a headwind for the pound. Yesterday's unexpected rise in UK services PMI may have given GBP some support. However with UK Gfk Consumer Confidence Index at a 17-month low, and concerns remaining over the UK’s growing cost-of-living crisis, there were limited gains for the pound.

Key Movers

The US dollar is showing modest gains against the pound and euro. Better than expected economic data on the labour market helped firm expectations that the US Federal Reserve could be more aggressive in taking steps to curb inflation. Recent comments from US Federal Reserve officials have strengthened views that the central bank will likely hike rates by more than 25 basis points at its next policy meeting in May. Expectations for a hike of 50 basis points at that meeting are as high as 70.5%, according to market analysts. FOMC member, John Williams is due to speak later today which could affect USD exchange rates. However, the US dollar has shown little sensitivity to Fed comments since the bank’s last policy decision.

Expected Ranges

  • GBP/USD: 1.3135 - 1.3195 ▲
  • GBP/EUR: 1.1940 - 1.1995 ▲
  • GBP/AUD: 1.7505 - 1.7605 ▲
  • EUR/USD: 1.0965 - 1.1025 ▼