British Pound (GBP)
The British Pound saw a lift this week as UK retail sales rose 0.6% in July, beating expectations of 0.3%. The stronger-than-expected data helped GBP recover ground against both the Euro and the US Dollar, offering short-term support after recent losses. However, subdued annual growth figures and concerns over the upcoming UK November Budget continue to weigh on sentiment, limiting the potential for a long-term rally.
Euro (EUR)
The Euro remained under pressure after Eurozone retail sales fell 0.5% in July, missing forecasts and signalling ongoing weakness in consumer demand. While EUR gained slightly against risk-sensitive currencies in a cautious market mood, it slipped against both GBP and USD. With few new economic drivers, traders are now focused on the upcoming Eurozone GDP data for clues on growth prospects.
US Dollar (USD)
The US Dollar weakened as softer labour market figures fuelled speculation of a potential Federal Reserve rate cut later this year. The Dollar Index fell 0.2% ahead of the highly anticipated US nonfarm payrolls report, which could provide further direction. Analysts at Bank of America note that while the Dollar is now closer to fair value after years of overvaluation, structural factors point toward a gradual USD weakening trend in the months ahead.
Key Takeaway
With GBP/USD testing support levels and EUR/USD struggling to find momentum, upcoming data releases – particularly US payrolls and Eurozone GDP – are likely to drive volatility. Businesses with international exposure may want to review their FX hedging strategies ahead of Q4.