The Euro stormed to an eight-month high against the Pound and achieving its highest levels against the US Dollar since the summer of 2015.
The European Central Bank’s (ECB) interest rate decision was the main reason for the Euro’s impressive surge.
Although the ECB made no changes to monetary policy and indicated that patience remained the order of the day, hints from President Mario Draghi that discussions centring on the tightening of stimulus would begin in the autumn gave the Euro a serious shot in the arm.
The Euro also benefited from the fact that the Pound was seriously struggling in the face of Brexit-related concerns, while the US Dollar remained under pressure ahead of this week’s Federal Reserve interest rate decision.
June’s UK retail sales figures were positive on their own, but markets were more interested in the wider context, which didn’t paint such a good picture.
Sales in June rebounded after declining -1.1% in May to grow 0.6% – better than the 0.4% economists had predicted. This meant that year-on-year sales climbed from 0.9% in May to 2.9% last month; 0.4% better-than-expected.
Markets weren’t impressed, however. Combined with April and May’s figures, the latest data shows that retail sales grew 1.5% in the second quarter. Considering sales fell -1.4% in the first quarter, this means the retail sector has flat lined overall in 2017 thus far.
Last week’s saw GBP/USD drift below $1.30.
However, the Pound’s losses against the US Dollar were limited as the North American currency came under pressure of its own. Bets that President Donald Trump will struggle to implement planned spending and tax adjustments are limiting demand for the US Dollar, as is speculation surrounding this week’s Federal Reserve interest rate announcement.
While the US Dollar managed to just about come out on top against the Pound last week, USD did drop to a two-year low against the Euro.
In the week ahead:
Monday: Bank of Japan Monetary Policy Meeting Minutes
Tuesday: USD Housing Price Index
Wednesday: AUD Consumer Price Index
GBP Gross Domestic Product
USD Fed Monetary Policy Statement
USD interest rate decision
Friday: USD Domestic Product Annualized