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UK Retail Sales miss as markets eye US inflation data
Daily Currency Update
UK retail sales unexpectedly fell by 0.1% month-on-month in November, defying expectations for a 0.4% rebound and dealing a blow to retailers during the critical “Golden Quarter.” The data highlights ongoing caution among UK consumers despite easing inflationary pressures.The weak retail figures follow the Bank of England’s 25 basis point rate cut on 18 December, intensifying downside pressure on Sterling. The Pound is trading defensively as markets increasingly price in a more aggressive easing cycle from the BoE in early 2026.
In the eurozone, German GfK consumer sentiment deteriorated sharply to –26.9 from –23.2, pointing to worsening household confidence. Meanwhile, German producer prices fell by 2.2%, reinforcing evidence that inflationary pressures at the factory gate continue to fade.
Key Movers
In foreign exchange markets, Sterling is outperforming the euro, with GBP/EUR edging higher, but remains capped against the US dollar. Recent ECB commentary indicating it is “not ready to abandon dovish flexibility” has helped limit volatility in the single currency.Market focus today remains on the British Pound, following weak consumer data, and the Japanese Yen, which has experienced significant volatility after the Bank of Japan raised interest rates to their highest level since the 1990s – a landmark shift in monetary policy.
The US dollar is trading in a cautious, wait-and-see mode ahead of the upcoming Personal Consumption Expenditures (PCE) inflation report. Should the data confirm faster-than-expected disinflation, the dollar could finish the week on a softer footing. For now, it continues to act as a relative safe haven, particularly against the Yen amid ongoing market adjustments to the BOJ’s policy shift.
Note: This marks our final market update of 2025. We wish all readers a happy holiday season and a strong start to the New Year.
Expected Ranges
- GBP/USD: 1.3330 – 1.3380 ▼
- GBP/EUR: 1.1410 – 1.1460 ▲
- GBP/AUD: 2.0230 – 2.0260 ▲
- EUR/USD: 1.1690 – 1.720 ▼
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