GBP/USD Retreats As UK Consumer Confidence Falls To New Lows

Key Insights

• Traders continue to buy the U.S. dollar ahead of the weekend. 
• Robust online spending provided support to UK Retail Sales in July. 
• Germany’s PPI reached new highs. 

Traders prefer the safety of the U.S. dollar due to the challenging situation in the EU and UK economies. Currently, the U.S. Dollar Index is trying to settle above the 108 level. In case this attempt is successful, it will continue to move towards yearly highs at 109.30, which will be bearish for the euro and the British pound.

GBP/USD

GBP/USD is moving towards yearly lows as traders remain worried about the health of the UK economy.

Today, the UK released Gfk Consumer Confidence report, which indicated that Consumer Confidence declined from -41 in July to -44 in August.

UK Retail Sales increased by 0.3% month-over-month in July, while analysts expected that they would decline by 0.2%. An increase in online spending provided support to Retail Sales. On a year-over-year basis, UK Retail Sales declined by 3.4%.

Currently, GBP/USD is moving towards the 1.1800 level. RSI remains in the moderate territory, and there is enough room to gain additional downside momentum. If GBP/USD settles below 1.1800, it will head towards yearly lows at 1.1760.

EUR/USD

EUR/USD is also under pressure as traders rush to the safety of the U.S. dollar. Today, traders had a chance to take a look at Producer Prices data from Germany. The report indicated that Producer Prices increased by 5.3% month-over-month in July, compared to analyst consensus of 0.6%. On a year-over-year basis, Producer Prices increased by 37.2%.

Germany’s Producer Prices data highlighted the negative impact of the energy crisis on German producers. The situation got worse in August due to higher natural gas prices and severe drought, which hurt power generation.

The surge in Producer Prices will push the Euro Area Inflation Rate to new highs in the upcoming months. The ECB has no choice but to raise the rate by 50 bps at the next meeting. However, the Fed could be even more hawkish, so the U.S. dollar stays strong against the euro.

For a look at all of today’s economic events, check out our economic calendar.