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Pound Sterling Takes a Pause Following Unexpected Retail Sales Decline

Retail sales sink the British pound

The British pound is softer ahead of the weekend following a disappointing retail sales release.

In a week devoid of major economic data events for the pound the retail numbers were always likely to have a significant impact.

For those hoping for a better exchange rate the news has unfortunately come in on the wrong side of expectations.

Markets had priced sterling for a reading of 0.3% but the actual figure announced by the ONS was -0.2%.

The surprise decline has had a notable impact:

  • The pound euro exchange rate fell an eye-opening 0.95% to reach 1.4151. At the time of writing the pair is at 1.4166.
  • The pound to dollar exchange rate fell 0.60% to 1.5522. It is presently at 1.5493.
  • The pound to Australian dollar was half a percent lower at 2.1061. The pair does represent a bright spot on Friday having climbed back to 2.1220.

Note, these are inter-bank quotes, your bank will charge a spread on discretion when conducting money transfers. However, an independent provider will get you closer to the market, this can result in up to 5% more currency in many instances.

The ONS reported, “Compared with May 2015, the quantity bought in the retail industry was estimated to have decreased by 0.2%. Falls were reported by predominantly food stores, other stores, household goods stores and petrol stations.”

Dennis de Jong, managing director at UFX.com says:

"The combination of falling inflation, lower fuel prices and a rise in earnings has supposedly left UK consumers with more money in their pockets, but their spending hasn’t matched up this month.

"Chancellor George Osborne would have been looking for positive retail figures on the back of his recent spending review. However, today’s surprising drop isn’t what the doctor ordered.

"This reduces the likelihood of Bank of England Governor Mark Carney delivering an interest rate Christmas ‘present’, although we’d still expect that to happen around the end of Q1 2016."

Looking ahead, on the 28th of July second quarter GDP is due for release. Outside of GDP, it is otherwise a very quiet and light data week heading into the set up for the BoE August Inflation Report.

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