UK Slowdown Worries As Retail Data Falls
The British Pound faced headwinds into the weekend after the ONS revealed UK retail sales fell sharply in September, suggesting an economic slowdown might be worse than many economists had expected.
Retail sales for September fell 2.6% year-on-year, which is deeper than the 1.7% decline the market was looking for and the -0.9% figure reported for August.
Sterling has found support of late by growing expectations of a BoE interest rate rise, with the market now fully invested in a 15 basis point hike at the November meeting with further hikes expected in 2022 taking the Bank Rate to 1.0% by the end of next year. Downside risk could emerge however should expectations soften.
In level terms, the key currency pairs open this morning at very similar levels to 24 hours ago. This is reflected in EUR/USD starting in the bottom half of the 1.16-1.17 trading band. GBP/EUR is operating in the lower half of the 1.1875-1.18 corridor whilst the GBP/USD is continues to change hands just below the 1.38 handle.
Datawise, flash PMI figures will be released for October in the US, UK and Eurozone. Lower readings are pencilled in for the UK and Eurozone with the US composite measure set to be unchanged.