Retail sales stopped rally in the pound

01/20/2023

1 minute read

2023.01.20 09:16

On Friday, the British pound dipped slightly. It is trading down 0.27 percent at 1.2360 during the European session.

December saw poor retail sales in the UK. The reading in November was -0.5%, below the forecast and falling -1.0% m/m. The decreased by 1.1%, which was lower than the reading of -0.3% in November and was below the forecast of 0.4%. The headline retail sales came in at -5.8% and the core rate at -6.1% on an annualized basis, which was worse than November and below estimates.

Consumers cut back as a result of the cost-of-living crisis, so any hopes of a Christmas spending surge were dashed. Consumers are expected to keep their wallets tight as a result of the high costs of food, energy, and healthcare, as well as the decline in wages caused by GfK Consumer Confidence dropped to -45 in December, down from -42 in November and just shy of the consensus of -40. Consumer confidence remains in a deep freeze.

The economy is in trouble because of low consumer spending and confidence, but the Bank of England has no choice but to keep raising interest rates to reduce inflation. The BoE anticipates that inflation will fall to 5% by the end of the year, so this will take time.

Today marks the beginning of a two-week blackout period for the Federal Reserve ahead of the rate meeting on February 1. As a result, Fed officials’ public statements and interviews will be severely restricted.

As a result, the significance of Fed member Brainard’s remarks on Thursday increased. Brainard gave the impression of being a hawk by stating that interest rates needed to stay high despite signs that inflation was beginning to ease. The markets have priced a peak at around 4.75 percent, while the Fed dot plot predicts that rates will peak at 5.1%. Later today, members of the Fed Harker and Waller will speak to us.