This GBP update discusses yesterday's Retail Sales figures and looks ahead to next week's events that could affect Pound Sterling exchange rates. The table below shows the market movements for a number of GBP currency pairings yesterday:

Currency Pair% ChangeDifference on £200,000
GBP/EUR1.65%€3740
GBP/USD0.8%$2060
GBP/CAD1%$3240

GBP EUR Falls to 8 Month Low

The Pound continues to take sizeable losses this week having seen further losses against all of the major currencies yesterday. Despite better than expected retail sales data as a result of the warmer weather it wasn’t enough to see a rally for Sterling exchange rates. The Pound actually fell to an eight-month low against the Euro although comments from ECB president Mario Draghi also helped strengthen the Euro. For more detail on what was said at the press conference and its impact then please see today's Euro forecast report.

Yesterday's announcement showed that UK retail sales rose to 0.6% for the month of June which largely stemmed from strong clothing and shoe sales.

However, the numbers have been taken with a pinch of salt due to the warmer weather in June which is why there hasn’t been a positive market reaction for the Pound. This was the hottest June since 1910 so it could be argued that these figures should have been considerably stronger.

The positive figures are welcome but it is next week’s Growth Domestic Product (GDP) numbers for the second quarter which will be of paramount importance. The risk for those clients holding Sterling is that any weakening in growth could move us closer to recession territory and this would be Sterling negative. The combination of higher inflation and weak wage growth is squeezing consumer pockets and this may start to show in the official data.

The continued uncertainty from Brexit now over one year on from the vote to Leave on 23rd June 2016 is also weighing on the Pound. A meeting yesterday between Brexit secretary David Davis and his EU counterpart Michel Barnier appeared to show the issues surrounding citizens’ rights and the financial settlement are yet to be agreed on. There is still a long way to go in this negotiation and the Pound should remain under pressure until real clarity is offered.

UK Debt – Sterling Outlook

Bank of England Governor Mark Carney has recently warned about the dangers of consumer credit which has been growing rapidly at around 10% per annum. He has cited high credit card lending and the recent surge in car loans which pose a threat to financial stability. The concern is that consumer spending is being spurred on by debt which has similarities to the run up to the 2008 crash. UK household debt currently stands in excess of £1.5 trillion and any signs of a slowdown in the economy could see the Pound weaken sharply just as we saw during the financial crisis of 2008 when GBP EUR fell to parity.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me directly at jll@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.