GBP Touches 29-Month High Overnight Amid Weak UK Retail Data and Fed Rate Cut Speculation.

• GBP Outlook: The UK economic calendar is light, with attention focused on a post-market speech from Bank of England’s Catherine Mann. The GBP struggled due to weak retail sales data, highlighting ongoing consumer struggles with the cost of living.
• UK Retail Data: The Confederation of British Industry’s retail sales report for August missed forecasts, showing a smaller-than-expected improvement, indicating continued weakness in UK retail activity.
• GBP/USD Performance: The GBP/USD pair hit a 29-month high at 1.3266 on Tuesday, driven by speculation of a potential Federal Reserve rate cut in September.
• USD Context: Investors are anticipating a rate cut from the Federal Reserve, following Fed Chair Jerome Powell’s comments at the Jackson Hole Economic Symposium, with key inflation data expected later in the week.
• EUR Struggles: The Euro faced pressure due to disappointing German economic data, with the finalised GDP report showing a 0.1% contraction in Q2 and consumer confidence falling to its lowest since May, signaling ongoing challenges in the Eurozone’s largest economy.

GBP: Little of note is populating the economic calendar on the UK side, and Wednesday is shaping up to be a quiet session on both sides of the Atlantic. Central bank watchers will be looking out for a speech from Bank of England policymaker Catherine Mann, due after London markets close. GBP struggled to gain investor interest on Tuesday following the Confederation of British Industry’s latest distributive trades report. The CBI’s monthly retail sales balance missed forecasts in August, rising from -43 to -27, falling significantly below market projections of -11. The mid-tier data pointed to ongoing weakness in British retail activity, signalling that that UK consumers continue to grapple with cost-of-living woes.

USD: GBP/USD tested into a fresh multi-year high on Tuesday, easing into a 29-month peak of 1.3266. Investors have piled into hopes for a September rate cut from the Federal Reserve, and US Personal Consumption Expenditure Price Index inflation figures not due until Friday leave markets with little meaningful data to chew on until then. Fed Chair Jerome Powell all but confirmed that the central bank will pivot into a rate-cutting cycle on September 18 during an appearance at the Jackson Hole Economic Symposium last Friday, sending market appetite into the ceiling once again.

EUR: EUR faced headwinds on Wednesday following some downbeat releases from the Eurozone’s largest economy. The publication of Germany’s finalised GDP report confirmed that the economy shrank by 0.1% throughout the second quarter, as private consumption and gross fixed capital formation deteriorated throughout the summer months. The release served to deter investor interest in the common currency, amid signs of a sluggish German economic recovery persist. The latest GfK consumer confidence indicator in Germany missed forecasts. The indicator dropped to -22 in September, falling from a downwardly revised -18.6 in the previous month and missing forecasts of a slight uptick to -18. Marking the lowest reading since May, the data served to reinforce concerns about the health of the Eurozone’s largest economy, reviving worries that Germany remains the struggling area of the EU economy

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