A week of mixed data from the UK has helped boost the pound against the dollar GBPUSD, but has not allowed similar gains versus a resurgent euro GBPEUR. Promising inflation data at the start of the week helped sterling begin a modest rally, but gains were muted yesterday after retail sales were lower than expected. Compared with a year ago, sales rose by 4.2%, but economists had predicted an increase of 4.4% and this began a sell off against the single currency. With more pressing issues around the globe, namely a government shake up in Greece, yuan devaluation in China and uncertainty surrounding Fed monetary policy, the pound looks like it will be driven by external factors throughout the day and for much of next week.
The dollar started yesterday uneventfully, gaining initially against the pound due to poor UK data but relatively flat against the euro. This gave no hints to the carnage to follow as the US currency suffered a rout in the late afternoon which continued overnight. The S&P suffered its worst day in almost 18 months and dollar-longs were squeezed through stop after stop in a move that totals almost 3 cents in 48 hours. While the euro was the bigger benefactor, cable also rose through resistance levels, topping with a new 2 month high this morning. The US data yesterday had been mixed, but certainly not terrible. Rather, a re-position of Fed policy timing and expectations is fuelling the dollar sell off and with various technical levels being questioned, if the world reserve currency fails to recover ground throughout the day it may not bode well for the weeks ahead.
Breaking news from Greece that Prime Minister Alexis Tsipras resigned yesterday evening did not shake the currency markets as some may have predicted. The euro actually gained following the news and pushed to the strongest level in a month against the pound. A snap election, possibly as soon as September 20th, is now expected as the future of Greece continues to be in the limelight. There is a raft of euro-data out this morning, PMIs from various regions and the figures already out have been mixed but with little impact.
City AM- No respite in sight for the UK housing market.
The Times- Co-op Bank faces sale as losses top £200 million.
Telegraph- China manufacturing tumbles to six-year low.