FTSE Record High Limits Pound Sterling Selling on UK Retail Sales Setback

January 17, 2025 - Written by David Woodsmith

STORY LINK FTSE Record High Limits Pound Sterling Selling on UK Retail Sales Setback

Pound Sterling to Euro (GBP/EUR) and US Dollar (GBP/USD) exchange rates dipped after weaker than reported retail sales data on Friday, but did manage to stabilise later in the European session.

There was net Pound support from gains in equities with the FTSE 100 index posting a record high in early trading following reports of merger talks between Glencore and Rio Tinto.

The Pound to Dollar (GBP/USD) exchange rate slumped to 1.2160 before a recovery to 1.2195 and held above 14-month lows.

The Pound to Euro (GBP/EUR) exchange rate still posted notable losses to 1.1840 from 1.1875.

Position adjustment ahead of President-elect Trump’s inauguration on Monday is likely to be a key element on Friday.

ING commented; “Markets may tread carefully today ahead of Monday’s inauguration of President Trump. There are lingering concerns about the “day one” measures, some of which are priced in, which could generate some volatility early next week. For now, the dollar may stay in a holding pattern, retaining its overvaluation against some tariff-sensitive currencies.”

According to MUFG; “After strong gains over the last couple months, market participants are now waiting for confirmation that Trump will implement front-loaded and aggressive tariff hikes at the start of his second term to encourage further US dollar strength. However it has created the risk of a short-term sell-off for the US dollar if initial tariff plans fall short of expectations.”

UK retail sales volumes were reported as declining 0.3% for December after a revised 0.1% increase for November and compared with consensus forecasts of a 0.4% increase.

Underlying sales declined 0.6% for the month after a 0.1% gain for November.

For the fourth quarter, sales declined 0.8% from the previous 3-month period, although there was an annual increase of 1.9%.

Food store sales declined 1.9%, the weakest reading since 2013, partially offset by a 1.1% gain for sales outside the food sector.

According to the ONS; “Falls in supermarkets were partly offset by a rise in non-food stores, such as clothing retailers, which rebounded from falls in recent months.”

Capital Economics UK economist Alex Kerr commented; “After big declines of 4.1% in 2022 and 2.9% in 2023, sales rose only by 0.7% in 2024. And as with the wider economy, most of that growth in sales was from earlier last year and the year finished with very little momentum.”

There were some doubts over the accuracy of the data given updates from large companies and data from Kantar.

EY ITEM Club chief economic advisor Matt Swannell commented; “Seasonal spending has a large impact at the end of the year, and recent shifts in spending patterns can introduce large volatility into official estimates of retail activity, so the EY ITEM Club wouldn’t recommend reading too much into December’s fall.”

Although there are doubts surrounding the data quality, markets are convinced that the Bank of England will cut interest rates at the February 6th policy meeting.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Sterling Forecasts