UK retail sales disappoints but hike still on cards
Friday 21 April, 2023
Daily Currency UpdateUK March retail sales released today show that sales have essentially begun to flat-line since late last year and with the real wage story set to improve over coming months and confidence up in the latest figures, the worst is probably behind us for UK retail. The Bank of England may have been watching this data closely to see how the rise in interest rates has affected consumer spending, and it looks as though another 25 basis point rise is still very much on the cards in their May meeting. This leaves the pound range bound as we head into next week, with nothing allowing the currency to break through clear psychological levels of 1.25 on GBPUSD or 1.14 on GBPEUR.
Key MoversToday sees the flash of April PMI releases for the Eurozone, Germany, and France. The divergence between stronger services and still weak manufacturing is expected to continue - unless China's reopening has provided some surprises in terms of manufacturing confidence. The market is debating how much further the ECB will tighten its monetary policy, but the uncertainty has meant that EURUSD hovers between 1.09 and 1.10, in what has been a relatively low volatility week for the currency markets.
In what has been a quieter week for US data and the Federal Reserve, which goes into a blackout period ahead of its 3rd of May interest rate decision, increasing focus has fallen on progress on the US debt ceiling, at a time when US banks are happy to hang onto their emergency funding from the Federal Reserve. The US dollar has taken some heat from the IMF and ECB, who have both commented that the status of the US Dollar as a global reserve currency could be under threat as the global landscape changes, and appears to be on the back foot. However, the currency has found some respite around key psychological levels versus the EUR and GBP, and it may take the market waiting for the Fed's next move in May before settling on any further clear direction, and thus volatility could be lower over the next week too.
- GBP/USD: 1.2385 - 1.2470 ▲
- GBP/EUR: 1.1265 - 1.1320 ▼
- GBP/AUD: 1.8360 - 1.8615 ▲
- EUR/USD: 1.0965 - 1.1010 ▲