UK retail sales beat forecasts on Friday, countering effects of the UK inflation numbers on sentiment toward Bank of England monetary policy plans.
On Friday, UK retail sales and finalized Q3 GDP numbers drew investor interest. After softer-than-expected UK inflation numbers, weaker-than-expected retail sales could support an H1 2024 BoE rate cut.
However, UK retail sales surged 1.3% in November, with core retail sales also up 1.3%. Economists forecast both retail and core retail sales to increase by 0.4%.
According to the Office for National Statistics,
Finalized GDP numbers also needed consideration. The UK economy contracted by 0.1% in Q3 after expanding by 0.2% in Q2.
The surge in UK retail sales could support the Bank of England’s stance on interest rates. Three members of the Monetary Policy Committee voted for a 25-basis point rate hike. An upward trend in consumer spending would fuel demand-driven inflation and force the BoE to delay discussions about rate cuts.
Notably, the Office for National Statistics attributed the surge in sales volume to Black Friday sales. December figures could change the narrative.
Before the UK economic data, the GBP/USD rose to a high of $1.26918 before falling to a low of $1.26730.
However, in response to the stats, the GBP/USD slipped to a low of $1.26804 before rising to a high of $1.27133.
This morning, the GBP/USD was up 0.05% to $1.26962.
The Core PCE Price Index and personal income/spending figures will be in focus. Sticky US inflation and better-than-expected personal income/spending numbers could impact the bets on a Q1 2024 Fed rate cut.
Economists forecast the Core PCE Price Index to increase by 3.3% year-over-year in November vs. 3.5% in October. Significantly, economists expect upward trends in personal income and spending.
FOMC member comments relating to the US economic indicators need consideration.
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.