GBPUSD stalls under 1.23 after UK retail sales fall – Daily Market Brief, June 24, 2022

After steep losses in the previous session, stocks in Europe are heading higher today, helped by a strong close on Wall Street. Recession fears remain and sentiment is fragile.

·         Commodities fall across the week easing inflation fears and lifting stocks

·         FTSE, GBP/USD gain despite UK retail sales falling -0.5% as rising inflation bites

·         German IFO in focus after Germany sounds the alarm over gas security

Sentiment in Europe suffered yesterday following a slew of disappointing PMI data, which raised fears that major economies in Europe are heading toward a recession. The eurozone composite PMI, considered a good gauge for business activity, dropped to 51.9, down sharply from 54.8 in May. The level 50 separates expansion from contraction. Following the data, the DAX closed 1.7% lower, and the EUR/USD declined 0.4% to settle at 1.0525.

In the US, the market mood continued to improve, with the three main indices on Wall Street finishing firmly higher, with the Nasdaq outperforming. Stocks gained after Federal Reserve Powell wrapped up his two-day testimony before Congress despite PMI data highlighting the risk of recession. The Composite PMI fell to 51.2 from 53.8, which was expected to remain stable. Instead, recession fears are being played out in the US dollar, with USD/JPY falling 1.5% since Wednesday.


Commodity prices have come under pressure this week as recession fears are hurting the demand outlook. Copper, often considered a barometer for global economic health, fell to a 15-month low, down over 7% this week. Oil prices are also set to fall over 4% this week on fears of demand destruction. Falling commodity prices are easing inflation fears, which in turn are helping stocks higher. This makes sense, given that rising commodity prices have been the main drivers of inflation amid the fallout from the Russian war.

UK Retail sales

The FTSE is set to start the day 0.8% higher, and GBP/USD trades above 1.2225 as sentiment remains fragile following the release of retail sales data. Sales fell -0.5% MoM in May, down markedly from 0.4% rise recorded in April. Delving deeper into the numbers, the decline was mainly owing to slowing food store sales, which dropped 1.6% across the month. The data suggests that consumers are changing their shopping habits as inflation rises and the cost of living crisis deepens.

Despite today’s rise in the FTSE, the UK index is expected to fall around 1% across the week, after dropping 0.9% last week.

Looking ahead

Attention now turns to the German IFO business survey for June, which is expected to show continued weakness in conditions. The index rose marginally in May to 93 and is expected to fall to 92.9. Given that Germany escalated its alert level over gas security as Russia slows supply, it is difficult to see how the business climate can improve with the current backdrop.

The DAX is set to open 0.4% higher, and EUR/USD has risen 0.1% in early trade.

In the US, futures are pointing to a firmer open. Attention will be on new home sales, which are expected to fall as mortgage rates rise and amid affordability challenges.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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