The UK economy was in focus after the Bank of England interest rate decision. UK retail sales were flat month-on-month in February after surging 3.6% in January. Economists forecast retail sales to decline by 0.3% in February.
According to the Office for National Statistics,
Retail sales volumes were down 0.4% in the three months to February compared with the previous three months.
Retail sales were down 0.4% year-on-year in February and remained 1.3% below pre-pandemic levels (February 2020).
The pullback in retail sales supported the Bank of England outlook on interest rates and monetary policy.
On Thursday, the dynamics of the Monetary Policy Committee Meeting turned sharply dovish. The MPC voted 8-1 for holding interest rates at 5.25%. One MPC member voted for an interest rate cut. In the previous meeting, two MPC members voted for a rate hike in a 7-2 vote to leave interest rates at 5.25%.
Weaker consumer spending could dampen demand-driven inflation and fuel BoE discussions about an interest rate cut.
Before the UK retail sales figures, the GBP/USD rose to a high of $1.26750 before falling to a low of $1.26234.
However, in response to the retail sales data, the GBP/USD fell to a low of $1.26197 before steadying.
On Friday, the GBP/USD was down 0.24% to $1.26268.
On Friday, Fed Chair Powell and FOMC voting members Michael Barr, Michelle Bowman, and Philip Jefferson are on the calendar to speak.
Views on inflation, the economic outlook, and the timeline for a Fed rate cut warrant investor attention.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.