GBP/USD: Pound Extends Losses for 3rd Day in a Row as UK Retail Sales Drop Sharply
2024.11.22 05:59
The British pound is lower for a straight third trading day on Friday. In the North American session, is trading at 1.2543, down 0.36% on the day.
UK Retail Sales Weaker Than Expected
UK disappointed in October, with a sharp decline of 0.7% m/m. This follows a downwardly revised 0.1% gain in September and missed than the market estimate of 0.3%. Annually, retail sales rose 2.4%, well below the market estimate of 3.2%. The September reading was revised downwards from 3.9% to 3.2%.
The sharp drop in retail sales can be attributed to low consumer confidence and the recent Budget. The GfK consumer confidence index showed an improvement, rising from -21 to -18, but this points to a very pessimistic British consumer who is thinking twice before making discretionary purchases.
The Reeves Budget on Oct. 31 dampened consumer spending, as the government had warned about “difficult decisions” and proceeded to deliver a Budget with some 40 billion pounds worth of tax increases. Understandably, consumers held back on spending in October and retail sales were down across most categories.
The economy has slowed since the July election and services and manufacturing activity have decelerated for three straight months. The UK releases the Services and Manufacturing PMIs later today. The Services PMI is expected to remain unchanged at 52.0, while the Manufacturing PMI if projected to inch up to 50.0, up from 49.9. If the PMIs are weaker than expected, the pound could respond with losses.
The US will also publish manufacturing and services PMIs on Friday, with little change expected. The Manufacturing PMI is expected to rise from 45.5 to 45.8, and the Services PMI, which has been showing solid growth, from 55 to 55.2.
GBP/USD Technical
- GBP/USD is testing support at 1.2557, followed by support at 1.2525
- There is resistance at 1.2609 and 1.2641
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