GBP/USD Exchange Rate Sinks on Tumbling UK Retail Sales
The Pound US Dollar (GBP/USD) exchange rate is sinking today after UK retail sales declined further than expected amid the cost-of-living crisis.
At time of writing the GBP/USD exchange rate is around $1.2384, almost a half percent fall from this morning’s opening levels.
Pound (GBP) Dented by Dampening Retail Demand
The Pound (GBP) came under selling pressure once more this morning after the Office for National Statistics (ONS) reported that monthly retail sales fell by 0.9% in March. Predictions of a 0.5% fall were met with a 0.9% decline.
The wettest March in more than 40 years dampened shopper’s spirits as non-food stores, clothing, and department stores saw a 1.3% fall in trade. The latest figure comes after two straight months of strong retail sales growth, cheering investors as consumers appeared to brush off cost-of-living concerns. Darren Morgan, Director of Economic Statistics at ONS, said of the data:
‘Retail fell sharply in March as poor weather impacted on sales across almost all sectors. In the latest month, department stores, clothing shops and garden centres experienced heavy declines as significant rainfall dampened enthusiasm for shopping.’
Looking ahead, and the Sterling could find its footing once again after PMI data showed price pressures continuing to weigh on demand. With UK firms relentlessly increasing prices adding pressure to households, the Bank of England (BoE) could be forced to raise the interest rates for the 12th consecutive time next month. Chris Williamson, Chief Business Economist of S&P says:
‘Inflationary pressures have meanwhile continued to cool in manufacturing, but price pressures have picked up in services following the resurgence of demand.
‘This combination of faster growth and elevated price pressures put a twelfth rate hike by the Bank of England an increasingly done deal when it next meets on 11th May, and will add to speculation that further hikes may be needed.’
US Dollar (USD) Supported by Downbeat Market Mood
Meanwhile. the US Dollar (USD) found modest strength despite a lack of economic data this morning. With fears of global economic growth resurfacing, investors have become spooked, and the safe-haven ‘Greenback’ found renewed demand.
Continued concerns of further tightening from the Federal Reserve also served as boost for the US Dollar. A relentlessly hawkish stance from Fed policymakers ensures the ‘Greenback’ stays at least moderately supported.
Looking ahead, and an expected downturn in PMI data could spoil the party and see the US Dollar slide. Both manufacturing and services are expected to decline to 49 and 51.5 respectively. However, despite the slowdown in the service sector, it will remain in expansion territory, preventing further losses.
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