Pound Declines on Global Risk Aversion, Eurozone Retail Sales Fall
GBP
GBP/USD is trading lower at 1.2717 (interbank), whilst GBP/EUR is at 1.1647 (interbank).
This morning, retail sales grew in July as warmer weather boosted the sector, with total retail sales increasing by 0.5% year-on-year, up from a three-month average of 0.3%. In June, retail sales had fallen by 1.5% month-on-month.
Additionally, the S&P Global UK Construction PMI rose sharply to 55.3 in July from 52.2 in June, indicating robust expansion in the construction sector and marking the fastest growth rate since May 2022.
Despite these positive indicators, the Pound remains under pressure due to widespread risk aversion.
Policymakers have pushed back on expectations of consecutive rate cuts, yet markets are still pricing in at least two more cuts from the Bank of England by year-end.
Today’s Events (GMT):
00:01 - Retail Sales (Jul) - Actual: 0.3% vs Forecast: 0.3%
09:30 - S&P Global Construction PMI (Jul) - Actual: 55.3 vs Forecast: 52.5
EUR
EUR/USD is currently trading lower at 1.0915 (interbank) after surging to 1.1004 yesterday.
This morning, Eurozone retail sales decreased by 0.3% in June compared to May. In the EU, retail trade dropped by 0.1% month-on-month. Year-on-year, retail sales fell by 0.3% in the euro area but increased by 0.1% in the EU.
Germany’s factory orders surged by 3.9% in June, recovering from a 1.6% decline in May and significantly beating the 0.8% growth forecast. This suggests a strong rebound in the German manufacturing sector.
Investors still anticipate the ECB to reduce interest rates by 0.5 percentage points at its September meeting.
Today’s Events (GMT):
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07:00 - German Factory Orders (Jun) - Actual: 3.9% vs Forecast: 0.4%
10:00 - Retail Sales (Jun) Actual: -0.3% vs Forecast: 0.0%
USD
The dollar index, which measures the currency against a basket of major currencies, is down 0.46% to 102.68, after hitting a low of 102.15, its weakest since January 12.
Yesterday, the U.S. ISM Services PMI rose to 51.4 in July from 48.8 in June, beating expectations.
Despite this, the dollar has declined due to weaker-than-expected U.S. jobs data, disappointing earnings from major tech firms, and increased concerns about the Chinese economy. This has led to a global sell-off in stocks, oil, and high-yielding currencies, with investors seeking the safety of cash.
Moreover, traders fully expect the U.S. Federal Reserve to cut interest rates in September, anticipating more substantial cuts than the previously expected 50 basis points for this year.
No significant events are scheduled for today
CAD
USD/CAD is currently trading at 1.3831 (interbank).
The Canadian dollar strengthened slightly yesterday as the yield on benchmark government debt decreased. Canadian 10-year bond yields fell by 11 basis points to 2.998%.
The ongoing easing cycle at the Bank of Canada could support a positive outlook for the Canadian, and investors will watch Friday’s job data for July to see if there is a second consecutive month of weak results.
Moreover, oil prices have risen due to concerns about escalating conflict in the Middle East and reduced production at Libya's largest Sharara oilfield. Brent crude is up to $76.33 per barrel, while U.S. West Texas Intermediate crude has increased by 0.2% to $73.11.
No significant events are scheduled for today
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