The British pound is currently slightly weaker against all major currencies except the Japanese yen. The yen is weakening against all major currencies today. Yesterday, the British pound surged against the US dollar following stronger-than-expected retail sales growth and significant weakness in the US dollar. After tapping the top-end of yesterday's trading range (1.3280), GBP/USD closed the day slightly lower at 1.3270. Notably, trading volumes in British pound futures accelerated relative to the previous session, and compared to 30-day averages. Once again, traders appeared to be buying the currency with increasing conviction. Today's GBP/USD trading range is 1.2850 - 1.3360.
Looking at yesterday's data, while retail sales growth in August decelerated compared to July, note that July's figures were revised up sharply. As consumption is a significant component of the U.K.'s economy, this means that underlying economic growth is much stronger than current forecasts. As the outlook for growth improves, the pound is rallying in response. Two days ago, the pound also rallied after inflation figures for August accelerated relative to the previous month. The combination of accelerating growth and inflation is a good economic backdrop for the currency.
Turning to political news, the U.K. and the EU have been unable to come up with a workable comprise relating to the question of a hard border with Ireland. While the EU has rejected the 'Chequers' proposal, Prime Minister Theresa May has said that the EU's revised offer threatens the territorial integrity of the United Kingdom. Earlier today, Transport Secretary Chris Grayling told the BBC that a hard border with Ireland was inevitable unless the EU softened its stance. Our outlook on the British pound remains bearish.
GBP/USD is currently above 1.3240. EUR/GBP is up slightly, with the pair trading above 0.8890. The pound is down slightly against the Australian dollar and down slightly against the Canadian dollar. GBP/AUD is currently above 1.8160, while GBP/CAD is above 1.7090.
|September 19||Core Inflation Rate YoY AUG||2.1%||1.9%|
|September 19||Retail Price Index YoY AUG||3.5%||3.2%|
|September 19||Inflation Rate YoY AUG||2.7%||2.5%|
|September 20||Retail Sales ex Fuel YoY AUG||3.5%||4%|
|September 20||Retail Sales YoY AUG||3.3%||3.8%|
|September 21||Public Sector Net Borrowing AUG||£2.872B|