Daily Currency Update

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Pound moves higher on retail sales release

GBP - British Pound

Sterling was on a charge during Thursdays trade, fuelled by lack of Brexit developments and better than expected economic data. Following Wednesdays better than expected CPI, retail sales yesterday didn’t disappoint. Sales expanded 0.2% from a month earlier in July and 3.3% over the last twelve months. Sales excluding Autos and Fuel also came in above estimates, expanding 0.2% inter-month and 2.9% on a yearly basis.

On the Brexit front, nothing new other than speculations of potential snap elections if PM B.Johnson does not pass a potential no-confidence vote. This motion is likely to be sponsored by Labour leader J.Corbyn along with further plans of delaying Brexit, calling for general elections and favouring another referendum. Of course, markets have already tilted Corbyn’s plan as nonsensical.

The outlook on the British Pound looks increasingly fragile in tandem with rising odds for a Brexit ‘no deal’ on October 31. In the meantime, the Irish backstop remains the exclusive obstacle for the resumption of talks between London and Brussels, although the subject appears relegated in light of preparations for the ‘hard-divorce’ case.

GBP/EUR has charged back above 1.09 this morning and a level last seen on the 5th August. Cable followed suit and broke back in to 1.21 territory, after this initially fell during Thursdays trade.

Key Movers

The Euro came under pressure on Thursday after the Governor of the central bank of Finland and board member of the European Central Bank, Olli Rehn gave an interview with the Wall Street Journal, referring to the September policy meeting. The line that got the euro moving the most was “It’s important that we come up with a significant and impactful policy package,” this could allude to a more aggressive approach to next months meeting.

Retail sales in the United States increased by 0.7% on a monthly basis in July and beat the market expectation of 0.3%. With the initial market reaction, the Greenback gathered strength and the US Dollar Index (DXY) advanced to the 98 handle. The headline General Business Conditions Index of the Federal Reserve Bank of New York's Empire State Manufacturing Survey came in at 4.8 in August following July's reading of 4.3 and surpassed analysts' estimate of 3. Back to the US/China trade wars, there were early signs of retaliation from the Chinese with the proposed 10% increase in Tariffs starting next month. China said that the US action was violating the consensus reached at the G20 meeting in Osaka and reiterated that they will have to take countermeasures against the US tariffs, so watch this space.

We end the week on a quiet note as the economic calendar is incredibly light today.

Expected Ranges

GBP/USD: 1.2110 - 1.2180 ▲

GBP/EUR: 1.0890 - 1.0990 ▲

GBP/AUD: 1.7780 - 1.7920 ▲

GBP/NZD: 1.8750 - 1.8930 ▲