The UK retail sales report in October 2023 showed the worst situation since the pandemic lockdown era. As a result, the pound sterling slumped in GBP/USD and other pairs.
More and more UK economic data is weighing on the pound sterling. After the labor data a few days ago, it is now the turn of the retail sales report.
GBP/USD was observed circulating in a limited space around 1.2400 during the New York session on Friday (17/November). EUR/GBP is back near its highest level since May, while GBP/JPY fell nearly 1 percent.
The UK retail sales report in October 2023 showed the worst situation since February 2021 (COVID-19 pandemic lockdown era). All components missed expectations while falling drastically compared to the previous period.
Retail sales for all goods group recorded -0.3%, whereas the previous consensus expected +0.3%. September data was also revised from -0.9% to -1.1%. Annualized retail growth slumped further from -1.3% to -2.7%.
These figures reinforced the market's belief that the Bank of England (BoE) will likely cut interest rates from May 2024. Although wage growth in the UK is still one of the concerning drivers of inflation, the inflation trend will continue declining if public demand weakens.
"Consumption will remain weak, with higher mortgage costs next year; a gradual recovery is likely only in the second half of 2024," says David Alexander Meier, an economist at Julius Baer. "With rate expectations trimmed down, the best for the pound sterling is over."
Some analysts have a different opinion. According to them, UK retail sales data has the potential to recover in November data thanks to the Black Friday moment. As long as people still have abundant disposable income, retail sales can rebound quickly. Others argue that the lack of UK retail business last month was related to the bad weather.