Latest: Pound Sterling Slumps Against Dollar, Euro After High Street Yuletide Slowdown, Trump Ahead
- Pound to Euro Rate: 1.1550, down 0.22%
- Pound to Dollar Rate: 1.2291, down 0.42%
Pound Sterling fell on news that shoppers tightened their belts in December.
Retail Sales data showed an unexpected pull-back on Friday after contracting -1.9% month-on-month in December, when economist’s median estimates had been for it to drop by only -0.1%.
This was also much deeper than November’s -0.1% reading.
The GBP/USD pair fell 40 basis points, from 1.2330 to lows of 1.2290 after the release.
ONS data shows Core Retail Sales, with car and petrol sales stripped out, showed an even deeper pull-back of -2.0% from 0.2% in November and -0.3% forecast.
On an annualized basis, the data showed a slowdown from a very strong trend.
Headline Retail Sales rose a respectable 4.3%, but this was a decline from the 5.7% previously and the 7.2% forecast.
Core Retail Sales, meanwhile, rose 4.9% in December, from 6.4% previously, when a 7.6% rise had been expected.
“The Pound’s rally from the PM’s Davos (WEF) address came to a close this morning on the back of weak U.K. retail sales data, an initial sign that inflation and low job gains is affecting spending curbs. The sudden slowdown has been discouraging for the Pound as it traded around 0.39% down at 1.22 against the Dollar," says Paresh Davdra, CEO at RationalFX.
Commenting on the figures, FX analyst Paul Sirani at broker Xtrade said:
“Latest figures today show that the retail industry took a turn for the worse as 2016 came to a close, with both monthly and year-on-year numbers plummeting to a concerning level.
“A bleak few months are predicted for the retail sector, as it bears the brunt of soaring prices and the depreciating pound.
“The combination of these two factors looks set to pile even more misery upon consumers, painting a gloomy outlook for growth in 2017.”
However, analyst Joshua Mahony at IG says it is not as simple as blaming rising prices as the retail sector is undergoing structural change:
"Crucially we have seen the impact that pre-Christmas sales such as Black Friday and Cyber Monday have upon December sales, with the months of October and November instead enjoying a boost. The 1.2% growth for Q4 retail sales goes to show that perhaps we should get used to the festive period looking a little less reliant upon December and instead should take the quarter as a whole."
Up Ahead, More Trump-Inspired Dollar Strength?
Next up for Sterling is the Donald Trump inauguration at 17:00 GMT.
"The world market focus today is on the inauguration of the new President of the USA – a major development that is likely to play a pivotal role in the way business is conducted around the world. His comments against the ‘strong-dollar’ policy have in recent days negatively affected the dollar, as it goes against the policy of dollar preferment as promoted by the previous administration," says Davdra.
Currently the Dollar holds strong ground against world’s major peers on the back of recent comments from Yellen on likely rate hikes, furthermore, we are expected to see positive fluctuation later in the day as the new president is sworn in.
"The market reaction to Trump’s election victory has previously pushed the Dollar higher, we expect a similar reaction today,” says Davdra