The pound was 0.25% lower against the dollar early on Friday morning
Sterling dipped on Friday as retail sales surpassed expectations, while uncertainty remains over rising Covid-19 cases and the impact on the UK economy.
The reaction was muted in the FX market “with both EUR and GBP trying to recover some of the losses against the dollar, testing the $1.18 and $1.38 resistance levels,” Jesús Cabra Guisasola, Associate at Validus Risk Management, said.
The pound has held relatively steady over the past week amid the threat of a wide selloff in a number of currencies due to concerns over the spread of the Delta variant.
At 1116 GMT, the pound was 0.25% lower against the dollar at $1.3739, and down by a similar amount versus the euro.
Retail sales jumped in June, as football fans eat and drank their way through the Euro 2020 football championship, following a slump in May.
The Office for National Statistics revealed on Friday that month-on-month retail sales in the UK rose by 0.5% between May and June.
Commenting on GBP and EUR reaction to the latest PMI figures, Jesús Cabra Guisasola said: “While the Eurozone PMI composite came out higher than expected in July 60.6 (vs 60 estimated) and rising for the fifth consecutive month, PMI in the UK fell considerably and unexpectedly to 57.7 from 62.2 in June, compared to the consensus of 61.5.”
“On the UK side, the economic recovery has been stronger due to the success in its vaccination programme and new daily Covid-19 cases have been coming in lower during the past few days. However, it will be important to see if this is sustained in the long run given the reopening could help to spread the virus more rapidly.
“Meanwhile, risks continue to be on the table for the euro area with the delta variant spreading across the continent. Moreover, inflation has been well below the ECB’s target, which has provided some further support for the central bank to maintain its ultra-dovish tone and favourable financing conditions.”
