The British pound fell against most of its peers for the second day in a row on Thursday, following the release of lower than expected Retail Sales data in the United Kingdom. The weak consumer demand continued a trend of disappointing economic releases over the past few days, as inflation rose while wage growth lagged behind.
The UK Office for National Statistics said in a report that was published this morning that Retail sales within the country dropped by 0.8% between August and September. The drop was 0.7% bigger than the decrease that analysts had expected, which further confirmed a weak economic performance in the third quarter of 2017.
The drop was largely caused by 6.7% fewer sales of nonessential items, followed by a 1.6% decline in fuel sales. Meanwhile, sales of household goods and clothes rose to partly erase decreases in other sectors. Core retail sales, which exclude fuel sales, dropped by 0.7% last month. The drop in September pushed down the yearly growth of retail sales to 1.2% from 2.3% in August, while core sales fell to 1.6% from 2.6%.
Inflation in the United Kingdom hit 3.0% last month, which squeezed consumers whose wages grew 2.2% in the 12 months ending in August. The effect of the UK’s departure from the European Union was seen in higher import costs, which raised inflationary pressures. However, consumer demand might further suffer as the Brexit negotiations continue.
The widening gap between inflation and wage growth may force the Bank of England to delay the next interest rate hike until a clearer picture of the UK economic situation is available. Investors lowered their expectations that the central bank may increase interest rates in November after this week’s lackluster data.
GBP/USD traded at 1.3189 as of 15:45 GMT on Thursday after falling to 1.3144 at 08:30 GMT, the pair’s lowest level since October 12. GBP/USD began trading today at 1.3211. EUR/GBP touched 0.8979 after touching 0.8986 at 10:30 GMT, the strongest level since October 12. EUR/GBP started the day at 0.8927.
© YahiaBarakah for Forex News, 2017. |
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Post tags: Bank of England, Office for National Statistics, Pound, Retail Sales, United Kingdom
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