GBP/USD Returns to $1.19 on Better-Than-Expected UK Retail Sales

It was a busy day for the GBP/USD, with UK retail sales figures for October in the spotlight. Following Thursday’s Autumn Statement and the OBR’s gloomy economic outlook for 2023, today’s figures drew more interest than usual.

In October, retail sales rose by 0.6%, partially reversing a 1.5% slump from September. Economists forecast a 0.3% increase.

According to the ONS,

• All of the main sectors saw increases except for food stores, where sales volume fell by 1.0%.
• Non-food store sales volumes increased by 1.1%, leaving volumes 1.7% below pre-COVID-19 levels in February 2020. In contrast, food store sales volumes were down 4.1% from pre-COVID-19 levels.
• Automotive fuel sales volumes increased by 3.3%, while non-store-retailing sales volumes increased by 1.8%.
• Non-store-retailing sales volumes were 21.2% above their pre-pandemic levels.
• Year-over-year, retail sales were down 6.1% versus 6.8% in September.
• In September, many retailers closed on September 19 for the State Funeral of Her Majesty Queen Elizabeth II.
• Sales volumes fell by 2.4% in the three months to October 2022 when compared with the previous three months.

While the headline numbers were GBP/USD positive, uncertainty towards the economic outlook and BoE monetary policy remains a test for the GBP/USD at current levels.

Considering the UK Government’s Autumn Statement, the OBR projects the UK economy to fall by 1.4% in 2023 before rising by 1.3% in 2024. In March, the OBR forecasted economic growth of 1.8% in 2023.

Following today’s stats, Bank of England chatter will draw interest, with Monetary Policy Committee (MPC) member Jonathan Haskel speaking today. This week’s UK economic indicators have placed more pressure on the Bank of England to take more aggressive steps to tame inflation. Expect any references to this week’s stats and monetary policy to influence.

GBP/USD Price Action

At the time of writing, the Pound was up 0.35% to $1.19059.

This morning, the GBP/USD fell to an early low of $1.18579 before rising to a high of $1.19317.

However, in response to today’s stats, the GBP/USD rose to a post-stat high of $1.19112 before easing back.