Following a similar pattern to yesterday, the pound fell yet again this morning touching the same seven week low as yesterday against the euro. This followed data showing UK retail sales unexpectedly fell in August for the first time in 6th months, while strong demand at a Spanish auction lifted the single currency. Expect this pairing to not deviate to far from the €1.20 mark.
UK retail sales fell by 0.5% in August, surprising analysts who had forecast a modest increase of 0.3% after several months of solid growth. The data shows that UK consumers may be reining in spending ahead of substantial spending cuts planned by the government later in the year. Duncan Higgins, senior analyst at Caxton FX comments, “The data rather confirms fears that the UK economy is set to post a disappointing GDP figure for the third quarter. Food, fuel, clothing, and household good sales all made moderate declines in August as consumers tighten their pockets ahead of what is set to be a tough end to the year.”
Mervyn King, the Governor of the Bank of England in a speech yesterday reiterated the fact that if conditions continue to deteriorate further, the BoE are prepared to step into action with further quantitative easing.
In other news, a decision by the Swiss Central Bank to keep interest rates steady at 0.25%, along with a dovish statement has sent the franc lower against most of its peers. This could be a measure to devalue the currency after its meteoric rise of late.
