Pound slumps on worst retail sales fall since financial crisis

Dire retail sales data for October sent the pound tumbling yesterday, with falling confidence in the UK government doing nothing to alleviate losses.

The pound remains largely in the negative this morning. GBP/EUR has weakened to €1.1277, while GBP/USD has slipped to US$1.3106. GBP/AUD has edged up to A$1.7155, GBP/NZD has dropped to NZ$1.9143, and GBP/CAD is stuck around C$1.6880.

Brexit gloom is likely to remain in charge of GBP exchange rates today, but read on to see what Eurozone and US developments are likely to cause turbulence...

What’s been happening?

The pound was on poor form yesterday, with confidence undermined by further chaos in government and terrible retail data.

The Confederation of British Industry (CBI) retailing reported sales index revealed the worst monthly fall in sales since the financial crisis after crashing from 42 to -36, against forecasts of a drop to 14.

Additionally, it was suggested that the transitional period following Brexit may not be a full two years and that the UK may be forced to seek an extension to its EU membership in order to give Parliament time to ratify the final Brexit deal.

GBP/EUR had recorded losses during the morning yesterday, but was able to recover these and even make some soft gains after the latest European Central Bank (ECB) monetary policy announcements.

The ECB announced that it would taper quantitative easing as expected, cutting the rate of monthly asset purchases to €30 billion, although policymakers also decided to delay the end of the programme by at least nine months.

The fact that the programme remains open-ended unsettled markets, causing the euro to sink.

GBP/USD tumbled, despite a series of somewhat disappointing data releases from the US.

The advance goods trade balance for September showed a slightly larger-than-expected deficit, while continuing jobless claims in the week ending October 14th wasn’t quite as low as hoped.

However, the data was not so far away from forecasts that there was any cause to be concerned. There was nothing in the day’s data to damage the odds of an interest rate hike in December.

The US dollar also benefitted from the weakness in the euro, driving GBP/USD lower.

What's coming up?

There is nothing on the UK data calendar for release today, which will likely leave Brexit gloom in charge of pound exchange rate movement.

Meanwhile the European Central Bank (ECB) will release its latest Survey of Professional Forecasters. Whether experts are upbeat or cautious on the outlook for the Eurozone economy will surely influence the euro today.

US third-quarter GDP figures are out today. Although expected to show a slowdown in annualised growth, some of this weakness may be attributed to the recent hurricanes. As long as the figures don’t vary too drastically from forecasts, it seems that market bets of a December rate hike will remain high, supporting USD.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.