The British pound (sometimes known instead as pound sterling) is the United Kingdom's national currency. According to a recent survey by the Bank for International Settlements, the pound remains the fourth-most traded global currency. Specifically, 6% of all foreign exchange trading involves the pound.
The British pound is currently slightly higher against all major currencies except the euro and the Australian dollar. Yesterday, the pound ended the day down sharply against the US dollar. Yesterday's sell-off was accompanied by accelerating trading volumes in British pound futures, which were higher relative to both the previous session and 30-day averages. The combination of a sharp move lower and higher volumes suggest that traders sold the currency with conviction. Today's GBP/USD trading range is 1.2920 - 1.3260.
Thanks to a combination of slowing retail sales data, concerning Brexit headlines and pressure on the euro, the pound had plenty of reasons to weaken yesterday. Starting with the data, year-over-year retail sales growth slowed to 3% in September. The figures were disappointing as comparable retail sales at this point last year were slowing in rate-of-change terms. As consumption is a significant component of the U.K.'s economy, slowing retail sales have broader implications for economic growth in the third and fourth quarter of this year.
Turning to Brexit developments, the pound sold off sharply yesterday after Theresa May said that the EU's proposal on the border was unacceptable. May also suggested that she would be willing to extend the transition period "for a matter of months" in order to address ongoing differences. Earlier today, sterling ticked up following Michel Barnier's comments saying that a Brexit deal was 90% complete. Barnier did, however, suggest that the Irish backstop issue remains a significant roadblock. As trade negotiations remain volatile, Brexit-related news continues to have a significant impact on the pound in the short term.
Lastly, the pound is likely to remain under pressure thanks to slowing growth in the Eurozone. As described in today's euro daily update, Italian debt concerns continue to weigh on the common currency. Given the U.K.'s significant trading relationship with the Eurozone, the pound is closely correlated to the euro. Our outlook on the pound remains bearish.
GBP/USD is currently above 1.3050. EUR/GBP is up slightly, with the pair trading above 0.880. The pound is down against the Australian dollar and up against the Canadian dollar. GBP/AUD is currently above 1.8260, while GBP/CAD is above 1.7080.
|October 16||Claimant Count Change SEP||18.5K||14.2K|
|October 16||Unemployment Rate AUG||4%||4%|
|October 16||Average Earnings excl. Bonus AUG||3.1%||2.9%|
|October 16||Average Earnings incl. Bonus AUG||2.7%||2.6%|
|October 17||Core Inflation Rate YoY SEP||1.9%||2.1%|
|October 17||Inflation Rate YoY SEP||2.4%||2.7%|
|October 17||BoE FPC Minutes|
|October 18||Retail Sales ex Fuel YoY SEP||3.2%||3.6%|
|October 18||Retail Sales YoY SEP||3%||3.4%|
|October 19||Public Sector Net Borrowing SEP||£-3.26B||£-4.76B|
|October 19||BoE Gov Carney Speech|
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