GBP: Retail sales disappoint

EUR: Helped as nervousness increases

USD: All hail King Dollar

Sterling

GBP has fallen to its weakest level against the USD for 7 months this morning following a decline in retail sales in July of 2.5%. There are a number of reasons why this could have happened; the reopening boost coming to an end, the rise of the delta variant and the European football championships also wrapping up.

Retail sales remain a crucial indicator of both UK growth but also consumer sentiment and further falls will likely be linked to increased concerns over Covid-19 and people thereby avoiding the shops, or pressure on earnings, and overall spending declining as a result.

These issues are not solely UK-centric however and therefore may be seen in other economies, also affecting their currencies. It’s just sterling’s time to take one in the teeth.

Near-term support should emerge at 1.3570 in GBPUSD and around 1.1610 in GBPEUR.

Euro

The risk of atmosphere and, in particular, the weakness in commodity currencies has helped the euro regain some support in recent days as investors exit risky bets funded in the single currency. Manufacturing and sentiment data next week are crucial for the recovery picture in Europe but given news from other manufacturing nations (Japan, China) in recent weeks, pressure on the car sector from both a supply and demand issue will weigh heavily.

USD

There is only one king at the moment and that is the USD. Equity market drawdowns and falling commodities mean one thing and one thing only, a stronger USD as investors look for a safe haven. This obviously comes on top of the wider USD demand from investors on the belief the Fed is set to start tapering its stimulus.

In other words, there are two reasons to hold the USD and, in some cases, no reason to hold another currency.

The US data calendar is quiet this morning and with only one speech from a Fed member – 4pm BST – we think that USD strength will continue into the weekend.

Elsewhere

With USD strength naturally comes Chinese yuan weakness and USDCNY is back above the 6.50 level that many in markets believe is a line in the sand for the authorities in Beijing. The yuan has lost ground of late following recent government crackdowns and fears over debt piles in the local real estate sector. Will this trade weighted USD strength trigger a response from Beijing?

Market rates

Today’s Interbank Rates at 08:56 against sterling. Movement vs Friday.

Euro	€1.165 ↓
US dollar	$1.361  ↓
Australian dollar	$1.914  ↑
South African rand	R20.93 ↑
Japanese yen	¥149.2  ↓

Have a great day and a better weekend.