Home Daily Commentaries Pound under pressure after poor retail sales

Pound under pressure after poor retail sales

Friday 20 January, 2023

Daily Currency Update

After a good streak for the pound this week, spurred on by positive employment data and speculation of further interest rate hikes from the Bank of England during their February meeting, today's UK retail sales dampened the mood for the currency, which has now lost some of its gains versus the Euro and US Dollar. UK retail sales posted a worse-than-expected -5.8% year on year and retail sales excluding fuel month on the month were -1.1%. This is actually a record fall in sales last year since records began in 1989.

Key Movers

Cristine Lagarde's speech was in the spotlight yesterday, during which she stressed that “European economic news has become much more positive. We may only see a small contraction in the Eurozone. The job market in Europe has never been as vibrant as now. 2023 won't be as brilliant but better than feared. Inflation is way too high. ECB is determined to bring it down to 2% in a timely manner and will stay on course with rate hikes. Inflation expectations are not de-anchoring and we have to avoid the case of that happening.” This didn’t really have too much of an immediate impact on the Euro, which had most of what Lagarde stated already priced into the exchange rates as the Euro rallied into the start of 2023. The Ukraine/Russia story came back to the news with Ukrainian ground starting to freeze/unfreeze, making it harder for any advancements for either side and the long-range strikes Russia has been undertaking with missiles to target the power grid haven’t had much effect because they were built by the soviet union to withstand a nuclear war. This could bring some short-term risk appetite into the market.

Expected Ranges

  • GBP/USD: 1.2285 - 1.2370 ▲
  • GBP/EUR: 1.1365 - 1.1445 ▲
  • GBP/AUD: 1.7680 - 1.7965 ▼
  • EUR/USD: 1.0770 - 1.0860 ▼