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UK Retail Sales figures caused the pound to fall

Friday 22 April, 2022

Daily Currency Update

We saw GBP/EUR bounce off a 10 day low yesterday after comments from Bank of England policy maker, Catherine Man, boosted the pound. This came after an initial slump earlier in the day following comments from European Central Bank officials who hinted at a potential interest rate hike in the coming months. Catherine Mann’s comments helped the pound recover from these losses however, as she stated, “we can look at whether or not an additional 25 basis points or more might be necessary in order to keep inflation anchored”. The markets may have read into the “or more” as an indication that a 50bp interest rate hike may be possible in the next BoE meeting as has been previously suggested, and this lent the pound some support. This morning has seen some heavy selling of the pound after the release of the UK Retail Sales for March. The figures released this morning showed a fall of 1.4% in March vs an expectation of just a 0.3% fall. The market has reacted strongly to this news with the pound being sold off by investors across numerous currency pairs. Against the euro the pound sits at around 1.1912 – down 0.95% on the day - and vs the US dollar the pound sits at around 1.2865 – down over 1.25% for the day – at the time of writing.

Key Movers

There were plenty of ECB policymakers in the spotlight yesterday – some of whom continued to talk about the chance of a July rate hike. This caused the euro to jump early in the day as it breached 1.0922 vs the USD but failed to push on much further. ECB President Lagarde was quoted saying that the impact of factors driving up inflation at the moment “should fade over time” but said that for the near term “inflationary risks are tilted to the upside”. ECB Vice President Luis De Guindos went on to say that the timing of the first interest rate hike will heavily depend upon economic projections but “from today’s perspective, July is possible and September, or later, is also possible”. All in all, these unexpectedly positive comments from policymakers have contributed towards the euro’s more positive performance of late.

Expected Ranges

  • GBP/USD: 1.2850 - 1.2990 ▼
  • GBP/EUR: 1.1895 - 1.1990 ▼
  • GBP/AUD: 1.7580 - 1.7690 ▼
  • EUR/USD: 1.0790 - 1.0870 ▼