GBP, USD, and EUR Show Mixed Movements Amid Key Data.

• GBP/USD Exchange Rate: The Pound saw modest gains as UK unemployment fell to 4.1%, but wage growth slowed, capping its rise due to inflation concerns.
• UK Wage Growth: Including bonuses, wage growth slowed to 4%, and excluding bonuses, it fell to 5.1%, reflecting a deceleration that may prompt further BoE rate cuts.
• USD Fluctuations: The US Dollar faced volatility due to mixed market sentiment and recession concerns, with bond yields dipping and inflation data expected to show a slight decrease.
• Eurozone Retail Trade: Retail trade in the eurozone grew by 0.1% in July, with a stronger 0.2% increase in the broader EU, following a decline in June.
• Country-Specific Retail Data: Croatia led monthly retail gains in the EU with a 2.9% increase, while Luxembourg saw the largest annual rise at 10.3%, contrasting declines in Belgium, Estonia, and Finland.

GBP: The Pound to US Dollar (GBP/USD) exchange rate remained indecisive on Tuesday following the UK’s latest employment data release. The Pound saw a slight boost as the unemployment rate in Britain dropped to 4.1% in July, aligning with forecasts and marking an improvement from earlier in the year. However, wage growth data complicated the picture. Including bonuses, wage growth slowed to 4%, down from 4.6%, while excluding bonuses, it fell to 5.1%, in line with projections but down from 5.4%. Strong wage growth has been a concern for the Bank of England (BoE), as it could fuel inflation and hinder efforts to control it. Liz McKeown from the ONS commented that last year’s one-off public sector payments continued to impact the figures. As a result, the GBP’s gains were limited, with increased speculation about further BoE rate cuts this year.

USD: The US Dollar experienced fluctuations due to a lack of major economic data and mixed market sentiments. Concerns about a potential US recession this year weighed on the currency, with no new data to drive its course. Analysts at ING highlighted investor attention on whether the Federal Reserve’s easing cycle would be gradual or more aggressive. A dip in US Treasury bond yields added to the USD’s downward pressure, leaving it near recent lows. All eyes are now on upcoming inflation data, with expectations for a slight decrease in headline inflation from 2.9% to 2.7%. This could heighten the chances of a Federal Reserve rate cut, potentially weakening the USD further. The Pound to US Dollar exchange rate will also be impacted by the UK’s latest GDP figures, with economists predicting 0.2% growth for July.

EUR: Retail trade in the eurozone showed mixed results in July 2024, with a modest 0.1% rise in retail volume compared to the previous month, while the EU overall saw a 0.2% increase. This followed a 0.4% drop in June for both regions. Year-on-year figures showed a slight decline of 0.1% in the eurozone, while the EU recorded a 0.4% increase. Food, drinks, and tobacco sales grew by 0.4% in the eurozone and 0.5% in the EU, though automotive fuel sales dropped sharply. Among individual countries, Croatia led with a 2.9% monthly increase, while Luxembourg saw the biggest annual jump of 10.3%. Conversely, Belgium, Estonia, and Finland faced notable declines, highlighting the ongoing challenges in these markets.