UK Retail Sales plunged 2.5%, a bad surprise for BoE

If you thought US retail sales in July were weak, declining by 1.1%, you did not see the UK figures. The fresh report showed a plunge of 2.5% last month against expected growth of 0.2%.

Year-over-year growth slowed from 9.2% to 2.4% and excluding fuel, from 6.8% to 1.8%.

Consumers in Britain have cut their spending sharply in response to an increase in infections in recent weeks and because of high inflation.

This data is as alarming as the sharp fall in consumer confidence in the US and could potentially put a stop to the Bank of England’s plans to raise rates earlier and cuts into its QE buying programme.

This unpleasant surprise in the data is developing pressure on the pound, which has lost 1% against the dollar in just over 24 hours, dropping to 1.3620. Cable has not traded steadily below 1.36 since January this year, and a dip under that level would open the way to 1.34 and on to 1.30, kicking off a corrective rally from the lows of April 2020.

The FxPro Analyst Team