UK Retail Sales Rise by 0.5% in July, Testing BoE Rate Cut Bets

UK Retail Sales Rebound in July

On Friday, August 16, UK retail sales influenced investor sentiment toward the Bank of England rate path. Retail sales increased by 0.5% month-on-month in July, recovering from a 0.9% decline in June.

Additionally, UK retail sales ex-fuel rose by 0.7% month-on-month in July, following a 1.3% drop in June.

According to the Office for National Statistics,

• Department store sales surged 4.0% in July (June: -3.4%).
• Non-food store sales increased by 1.4% in July (June: -2.1%).
• Food store sales were flat in July (June: -1.1%).
• Automotive fuel sales slid by 1.9% in July (+2.2%).
• Retail sales volumes increased by 1.1% in the three months to July 2024, compared to the three months to April 2024.

Retailers attributed the jump in department store and sports equipment store sales to summer discounting and sporting events, including the European football championship.

Bank of England Monetary Policy Implications

The rebound in retail sales could fuel demand-driven inflation, testing investor bets on a Q4 2024 Bank of England rate cut.

The recent UK inflation and wage growth numbers also suggest the BoE may needs to keep interest rates steady. On Monday, Bank of England Monetary Policy Committee Member Catherine Mann warned that services inflation and wages remained too high.

However, Blokland Smart Multi-Asset Fund founder Jeroen Blokland remarked on the recent inflation report, saying,

“Get ready for more Bank of England rate cuts! UK Headline inflation has been below the inflation numbers in France and Germany for four months.”

GBP/USD Reaction to the UK Retail Sales Numbers

Before the UK retail sales report, the GBP/USD fell to a low of $1.28461 before climbing to a high of $1.28793.

Following the UK retail sales data release, the GBP/USD fell to a low of $1.28737 before rising to a high of $1.28853.

On Friday, August 16, the GBP/USD was up 0.27% to $1.28827.

Up Next

Later in the session on Friday, US housing sector data and the Michigan Consumer Sentiment survey will require consideration. Consumer sentiment trends will likely influence investor hopes of a US soft economic landing. Upward trends in consumer confidence may signal a pickup in consumer spending that contributes over 60% to GDP.