GBP

Sterling fell against the euro and dollar on Friday as investor appetite soured amid rising Covid cases and disappointing UK retail sales. Office for National Statistics data showed month-on-month and year-on-year retail figures fell below expectations of 1.6% and 29% growth to read -1.4% and 24.6% respectively.

The data has come as a disappointing surprise to investors, with some questioning whether the UK’s economic recovery can live up to the lofty expectations economists set earlier this year.

The issue with lofty expectations is they’re often a little too lofty. Then when numbers don’t live up to forecasts the market has to readjust. This is especially noticeable if that potential good news has already been priced in, as recent reports suggest is the case here. 

This all adds insult to injury to a pound trading at two month lows vs the dollar and still licking its wounds from last week’s US Federal Reserve decision to bring interest rate hike expectations forward by a year.

On top of all this, the UK Covid situation is causing investors to rethink their positions on sterling. Data on Friday showed infections rose by around 9,000 with Delta variant cases up 79% in a week. It’s now believed to account for 99% of new cases. Fortunately, hospital admissions are still rising far slower than previous outbreaks. However, they still rose to 1,316 – the highest since the end of April.

Key announcements 

12:30 – EUR – ECB Lagarde Speech

14:15 – EUR – ECB Lagarde Speech
19:00 – USD – Fed Kaplan speech