Sterling Update: Latest Figures on Inflation, Growth and Retail Sales

Here’s the latest currency news from our partner Moneycorp, to help you find out what your money is worth.

GBP

After a quiet data week last week, the UK took centre stage this week with plenty of first-tier data sets released, including the latest figures on unemployment, inflation, growth and retail sales. These could all contribute to further speculation on the Bank of England’s interest rate policy, which has held the gaze of financial markets for some time. 

The data released this week gave us a holistic look into the state of the UK economy. Firstly, we saw the latest view of the employment market with UK average earnings, claimant count, and unemployment rate, all of which were released on Tuesday. 

Previous data showed a slowdown in the UK labour market, which was anticipated to have continued through July, albeit at a slower pace. Data showed a reduction in permanent contracts and slowly rising redundancy numbers, but unemployment came in lower than expected at 4.2%. These could be potential signs that an economy has the capacity for an easing in monetary policy, i.e. lower interest rates. 

On Wednesday, the latest CPI inflation data was released, showing both core and headline inflation rates for July in the UK. Inflation was expected to show a slight increase in prices throughout July to 2.3% year-on-year from the previous 2% figure but was reported slightly below expectation at 2.2%. Services inflation and wage inflation are particular focus areas in the data with the Bank of England rate-setters. 

The latest GDP growth data was released on Thursday, followed by retail sales figures on Friday. Growth increased by 0.6% between April and June, down from 0.7% in Q1. Retail Sales rose by 0.5% in July 2024, up from -0.9% in June.

Current market expectation is for two further cuts to the base rate by the Bank of England between now and year-end, although Andrew Bailey, Governor of the Bank of England, has reminded markets not to expect a rapid cycle of easing. 

EUR

The euro is on summer holiday, and enjoying a relaxed climb over recent weeks, which has been positive for those holding the single currency. 

The euro is typically a risk-sensitive currency, meaning it can be purchased heavily as the financial market risk outlook increases. This has been happening as we see increased action in equity markets and a short-term move away from safe-haven currencies. This seems to have benefitted the euro, as it moved to a three-month high against the pound and a seven-month high against the US dollar last week before slipping into a tight trading range at the end of the week. 

The main data release this week was the EU ZEW survey on Wednesday, which showed analysts’ weakening outlook for the EU economy. This follows recent data highlighting that both the French and German economies (the EU’s two largest economies) were underperforming both the UK and the US, with the latest growth data reporting 0.3% and -0.1% respectively.