Market report: inflation data boosts pound vs euro


The pound reached its highest level against the euro since early April yesterday, following strong UK inflation data earlier in the week.

This coincided with a EUR/USD sell off fueled by a hawkish comments at the US Federal Reserve’s rate conference. The Fed suggested there could be two rates hikes as early as 2023. The first rise wasn’t expected until 2024.

This has left the euro exposed as both the Bank of England (BoE) and the Fed look to normalise monetary policy ahead of the European Central Bank (ECB). This was reflected in euro rates against the pound and dollar.

This morning saw the release of UK retail sales data which showed a decline of 1.4% between April and May. However, total retail sales were up 9.1% when compared with pre-pandemic levels. The strongest monthly declines in sales volumes in May came from food stores and non-store retailers of 5.7% and 4.2% respectively. Both sectors were affected by the easing of restrictions for hospitality and non-essential retail. Non-food stores continued to report monthly sales growth of 2.3% in May, following growth of 25.6% in April. Fuel sales also increased by 6.2% from April, as people continue to travel more and more.

The pound still remains vulnerable to the rising cases of the delta variant. The UK’s exit from lockdown has already been delayed, which has negatively impacted consumer and business confidence, and the rise in cases is such the government could extend that further. 

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