The Pound (GBP) slipped against the majority of its peers on Thursday as the CBI reported that retail sales fell sharply this month.
CBI’s Distributive Trades Index plummeted from 42 to -36 in October, falling well below expectations of a more modest drop to 15 and reaching its lowest levels since 2009.
Analysts suggest that the sharp decline in sales is a sign that the gulf between inflation and wage growth is really starting to impact consumer spending, warning that this downtrend may persist during the fourth quarter.
The Pound Euro (GBP EUR) exchange rate soared by over a cent yesterday, striking a new two-week high following the European Central Bank’s (ECB) latest policy meeting in which the bank announced that it would begin tapering its stimulus programme from the start of next year.
While markets have been awaiting the Bank to begin winding down its quantitative easing programme for some time, investors were left disappointed by signals from ECB President Mario Draghi that the bank remained open to extending the QE programme again if policymakers felt it necessary.
Sterling slumped by over a cent against the US Dollar (USD) yesterday, reversing the gains seen on Wednesday, with the pairing’s initial fall being prompted by the weak retail sales report from the UK.
This uptrend in the ‘Greenback’ was accelerated even further in the afternoon as the US currency proved to be the main benefactor from the fall in the Euro.
The US Dollar may extend its gains even further later today as economists predict that the latest US GDP estimate will show that the US economy continued to grow at a robust pace in the third quarter.
The Pound Canadian Dollar (GBP CAD) exchange rate drifted around half a cent lower on Thursday as the UK’s abysmal retail sales report and the continued uptick in oil prices helped the ‘Loonie’ push higher.
Sterling also slipped against the Australian Dollar (AUD) yesterday as analysts suggested that the weak CBI retail report may dampen chances of a rate hike from the Bank of England (BoE) next week.
However the ‘Aussie’ was unable to press its advantage overnight as the currency was pressured by the strength of the US Dollar and another fall in iron ore prices.
New Zealand Dollar
The Pound New Zealand Dollar (GBP NZD) exchange rate told a similar story to its antipodean cousin, with the pairing trending lower on the back of the UK’s drop in retail sales, but its gains being muted slightly by the political uncertainty surrounding the new Labour government.