The rally in GBP/USD this morning above 1.31 was short-live, stopped-dead in its tracks by the release of some ugly UK retail sales data for December.
The retail sales volume contracted 0.6% mom and as a result retailers have now not recorded monthly positive growth since July. In year-on-year terms growth was unchanged at only 0.8%, the low since October 2017. Retail sales in the last quarter of the year contracted 0.9% qoq, the second weakest quarter since Q1 2010. The post general election bounce in consumer demand which many had expected, did not – on current evidence – materialise and markets are now pricing a 75% chance of the Bank of England cutting rates 25bp at its policy meeting on 30th January.
Aside from Sterling it’s more of the same. The Dollar has barely budged following the release in the past 24 hours of in-line with expectations retail sales and industrial output figures for December but a far better-than-expected Philly Fed manufacturing print for January. Meanwhile the Euro has resumed its steady slide down while the Kiwi Dollar remains a tad jittery.
