- Data released this morning showed that UK Retail sales fell more than expected in June, with the blame put of colder than average temperatures and uncertainty over the upcoming general election. The volume of goods sold in stores and online declined 1.2% against expectations of a 0.6% drop, with clothing, furniture and department stores the worst hit. The drop partly offsets the 2.9% surge recorded last month and means that the retail sector made no contribution to the UK’s economic growth in Q2, with sales falling 0.1% in the period. The data concludes a week of mixed UK data, where CPI inflation remained stable, average earnings decelerated inline with expectations and the unemployment rate held at the highest level since 2021. Separate figures also released show a larger than expected budget deficit in June, with national debt levels remaining at levels last seen over 5 decades ago at 99.5% of GDP. After posting gains earlier in the week and trading through 1.30, GBPUSD is back trading below 1.2950 this morning.
- Despite mixed US data this week, the dollar index has edged higher, as markets attempt to figure out the outlook for US rates after the better-than-expected retail sales data was offset with the weekly jobless claims coming in at the highest since May, suggesting a softer underlying economy. Odds of a September rate cut from the Fed sits around 24%, and 64% by year end however political uncertainty remain adding further questions to the outlook.
- As expected, the ECB kept interest rates unchanged at its policy meeting yesterday, and once again emphasised that it cannot currently commit to another cut in September. The announcement and subsequent press conference came and went with little fanfare with EURUSD dropping below the pivotal 1.09 on renewed dollar strength.
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