Last week, Sterling experienced a downturn against most of its G10 counterparts, influenced by the latest UK Retail Sales Data, which revealed a significant dip to levels reminiscent of the pandemic era. Notably, retail sales contracted by 2.4% in the year to October, marking a notable decline from September’s -1.5% and falling below the consensus forecast of -1.5%.
These discouraging retail sales figures have solidified market expectations that the Bank of England will initiate a series of interest rate cuts in 2024, responding to the strains on the nation’s economy. In turn, this has added additional pressure on Pound Sterling.
GBP|EUR edged just below the 1.14 threshold, while GBP|USD slipped slightly below 1.24. At present, GBP|EUR hovers around the approximately 1.1412 mark, reflecting the ongoing challenges. However GBP|USD experienced some upside and has managed to recover some lost ground and now rests at 1.2475.
The dynamics of the GBP|USD pair were notably influenced by a week dominated by key US economic data. The prevailing sentiment in the market, hinting that the Federal Reserve has concluded its interest rate hiking cycle, relegated the US Dollar to a secondary role. This backdrop allowed the GBP|USD pair to reclaim a portion of its recent losses.
On the data front this week we have the privilege of hearing from the Bank of England’s Governor, Andrew Bailey tonight. As the week unfolds, Wednesday brings the Monetary Policy Report Hearings, providing a deeper dive into the intricacies of the economic landscape. And on Thursday, all eyes will be on the Purchasing Managers’ Index (PMI) figures, offering a real-time pulse on economic activities
The Euro faced an uphill battle in garnering support during the initial half of last week, despite a noteworthy surge in German economic sentiment that surpassed expectations. As the week progressed, the euro exerted additional pressure on Sterling, fueled by a subdued market sentiment and a weakened Dollar USD, which, in turn, heightened demand for the single currency.
In the preceding week, the Eurozone’s final inflation rate for October made its debut. The confirmed report aligned closely with preliminary readings, settling at 2.9%. While the data exhibited limited impact on the Euro’s movements due to its adherence to forecasted figures, it did validate a swift cooling of inflation last month, amplifying expectations that the European Central Bank (ECB) has concluded its tightening measures.
As we navigate a relatively sparse Eurozone data calendar this week, the Euro finds itself at the mercy of its G10 counterparts. However, a notable event on the horizon is the impending release of Eurozone PMI data scheduled for Thursday. Any deviations from the consensus forecast could inject a dose of volatility into the Euro’s trajectory.
As we approach the upcoming holiday-shortened week, American traders are gearing up for Thanksgiving Day on Thursday, a factor that could usher in a period of subdued volatility and thin trading conditions leading into Black Friday.
The market’s focus will be on Tuesday, with the eagerly anticipated release of the Minutes from the Federal Reserve’s November meeting and the US Existing Home Sales data. These events are poised to have potential repercussions on the valuation of the Dollar.
Wednesday is shaping up to be a bustling day, featuring key US data releases including Jobless Claims and Durable Goods Orders. Additionally, on Friday, market participants will be keeping a close eye on the publication of the S&P Global preliminary Manufacturing and Services PMIs, adding an extra layer of insight into economic trends.
Adding to the mix, speeches from Federal Reserve policymakers throughout the week will be closely monitored, serving as valuable sources of information for any fresh hints on the US interest rate outlook.
If you have an upcoming currency requirement and would like to hear more about what is affecting the markets in the coming weeks, please contact us on 020 3876 5432.