Sterling at weakest vs euro in five months as retail sales weigh

LONDON (Reuters) – The pound was at its weakest against the euro in five months on Friday and was also under pressure versus the dollar as weak retail sales data reinforced fears about the health of the British economy.

The euro climbed as far as 87.40 pence, its highest since May, with the European common currency also set for its best week against the pound in a month.

The pound is typically sensitive to swings in global sentiment and has fallen alongside assets like stocks as the war in the Middle East and the relentless rise in U.S. yields sends investors to safe havens.

Friday’s moves were also driven by data that showed British retail sales fell more than expected in September, against a backdrop of broader cost of living pressures that could see the economy shrink overall in the third quarter.

Retail sales volumes dropped by 0.9% on the month after a 0.4% rise in August, the Office for National Statistics (ONS) said, a much bigger decline than the 0.2% fall economists had forecast in a Reuters poll.

“We saw some rather soft UK numbers this morning. Weak retail sales and a noticeable drop in consumer confidence, though both are among the most volatile UK data releases,” said Francesco Pesole, FX strategist at ING in a morning note.

“We have seen EUR/GBP rally above 0.8700 recently, which starts to look slightly overdone.”

The pound also dipped against the dollar though was last flat on the day at $1.2138, still holding above a six month low of $1.20585 hit earlier this month.

The pound has also been suffering against safe haven currencies and is trading at 1.0819 Swiss francs, its weakest since September 2022. The pound has fallen 3% against the franc so far this month, which, if sustained, would be its biggest monthly fall since June.

(Editing by Kirsten Donovan)