GBP Under Pressure After Weak Retail Sales | USD Strength Builds on Inflation Risks

Key Highlight

• GBP: Weakened following disappointing UK retail sales, adding to downside pressure

• USD: Gaining gradual support amid persistent inflation concerns and hawkish Fed rhetoric

• EUR: Largely subdued, with limited catalysts driving movement

Market Recap

Market sentiment on Thursday remained split between optimism around a potential ceasefire and the ongoing geopolitical uncertainty. Iran’s rejection of the US peace proposal kept oil prices elevated, ensuring inflation remained a key concern for markets.

This backdrop supported a more hawkish tone from Federal Reserve officials, with policymakers highlighting that sustained energy price strength could justify further rate hikes into Q2. As a result, the US dollar strengthened steadily.

Sterling, meanwhile, lost ground against the dollar, reversing gains seen earlier in the week. The pressure intensified following weaker-than-expected UK retail sales data, which showed a monthly contraction of -0.4% in February, down sharply from the previous 2% rise. This has reinforced concerns around UK consumer strength and added to negative sentiment surrounding the pound.

Market Update

With limited economic data scheduled, markets are likely to remain driven by geopolitical developments and central bank commentary.

Ceasefire headlines will continue to be a key influence, particularly heading into the weekend where unexpected updates could trigger volatility at the Sunday market open.

For GBP/USD, the combination of soft UK data and a firm US dollar suggests further downside risk, with recent lows potentially coming back into focus, especially if additional Fed commentary leans more hawkish.

The euro is expected to remain relatively range-bound, with minimal drivers beyond ECB commentary. Unless new catalysts emerge, it is likely to continue playing a secondary role in broader FX movements.

27th March 2026

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