Sterling has given up a portion of its weekly gains, particularly against the stronger US dollar, pushing GBP/USD below the significant $1.30 level. Compounding the issue was this morning’s disappointing UK retail sales data for June.

Retail sales volumes in the UK dropped by 1.2% in June, following a 2.9% increase in May. All sub-sectors weakened, with department stores, clothing, and footwear retailers experiencing the most significant declines. Although the GfK Consumer Confidence indicator for the UK rose to -13 in July from -14 in June, marking its fourth consecutive month of improvement to the highest level since September 2021, retailers cited election uncertainty, poor weather, and low footfall as reasons for the weaker sales. The British pound had been appreciating against its peers after the stubborn services inflation data earlier this week led to reduced expectations of a Bank of England (BoE) rate cut. However, with private sector wage growth slowing and consumer spending cooling, the BoE’s August meeting is uncertain. Markets have somewhat priced out an August rate cut, but if the BoE does decide to ease next month, it would likely have a very negative impact on the pound.

Sterling is also under pressure against the euro after approaching near two-year highs earlier in the week. The GBP/EUR pair's hold on the €1.19 level has weakened as it tests its 200-month moving average, a strong resistance level over the past eight years.