Weak UK Retail Sales Data Holds Puts Pressure On GBP EUR Exchange Rate

Modified: Thursday, 20 December 2012 14:47 BST - Written by John Cameron

STORY LINK Weak UK Retail Sales Data Holds Puts Pressure On GBP EUR Exchange Rate

There was positive news from the US economy earlier, when Q3 GDP figures for the American economy, released earlier this afternoon, showed that the world’s premier economy expanded by an annualised 3.1% in the three months to the end of September. The upward revision from previous estimates of a 2.8% improvement might be good news for US citizens, but it may well prove to be quite the reverse for the safe-haven US Dollar. The Greenback remains dependent on ‘bad news’ in order to thrive, so the encouraging signs regarding a domestic economic recovery may serve to weaken the ‘Buck’. Such an outcome could send the GBP USD exchange rate back above the 1.6300 level once again.

There was further bad news for the US Dollar this afternoon, when the latest weekly US Continuing Claims data was published. The significant labour market figure provided encouraging reading, revealing that the number of unemployment benefit claimants had slightly dropped from the preceding week.

Meanwhile, on the other side of the US border, Canadian Retail Sales numbers for October beat expectations to show at a month-on-month 0.7%. So far, the positive Canadian release has failed to help the Canadian Dollar and the GBP CAD exchange rate remains above the 1.6100 level. However, looking at the fundamentals, with GDP figures due out early next year expected to show that Britain’s economy contracted in the 4th quarter and the general tone of recent Canadian data releases being positive, the GBP CAD exchange rate may have a bout of downside to come.

Elsewhere, this morning brought the release of further disappointing data in the UK. The latest domestic Retail Sales numbers showed that British shop sales advanced by a lower-than-anticipated annualised 2.0% during last month. Analysts had been expecting a 2.2% improvement on the corresponding reading from twelve months before, especially given that October’s showing was a massively disappointing -0.8%. This below-par showing has raised concerns amongst investors holding GBP-denominated assets that December’s key Retail Sales numbers may also show at below their expected level.

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