United Kingdom Retail Sales: September’s 0.4% MoM fall steeper than -0.1% estimates

A weaker reading emerged for Retail Sales, a key gauge of consumer spending in the United Kingdom (UK), which declined by 0.4% month-on-month (MoM) in September, exceeding the market's forecast of a 0.1% fall. Figures released on Friday by the Office for National Statistics (ONS) showed that the decline followed a 0.7% increase in August, revised from 0.5%.

Further updates to follow...

Pound Sterling: Frequently Asked Questions

What should you know about the Pound Sterling?

Dating back to 886 AD, the Pound Sterling (GBP) is the world's oldest currency and serves as the United Kingdom's official currency. According to 2022 data, it ranks fourth globally in foreign exchange (FX) trading, representing 12% of all transactions, with daily turnover averaging $630 billion. Among its main currency pairs, GBP/USD, known as ‘Cable’, accounts for 11% of FX transactions. GBP/JPY, referred to by traders as the ‘Dragon’, represents 3%, while EUR/GBP accounts for 2%. Responsibility for issuing the Pound Sterling rests with the Bank of England (BoE).

Why do Bank of England decisions matter for the Pound Sterling?

Monetary policy set by the Bank of England has the greatest influence on the Pound Sterling's value. In making its decisions, the BoE assesses whether its main objective of “price stability” has been met, meaning inflation remains steady at around 2%. Adjusting interest rates is its principal means of pursuing this objective. To curb excessively high inflation, the BoE will seek to raise interest rates, increasing borrowing costs for households and businesses. GBP generally benefits because higher rates enhance the UK's appeal as a destination for global investors' funds. Conversely, inflation that drops too low signals a slowdown in economic growth. Under these circumstances, the BoE will consider cutting interest rates to make credit cheaper, encouraging businesses to borrow more for investment in projects that support growth.

Why can economic releases move the Pound?

By revealing the state of the economy, economic releases can affect the Pound Sterling's value. GBP's direction can be influenced by indicators including GDP, Manufacturing and Services PMIs, and employment figures. Sterling benefits from economic strength, which draws in greater foreign investment and may also prompt the BoE to raise interest rates. Such a rate increase will directly strengthen GBP. By contrast, weak economic figures are likely to weigh on the Pound Sterling.

Why is the Trade Balance important for the Pound?

The Trade Balance is another important release for the Pound Sterling, showing the gap between a country's export earnings and its spending on imports during a specified period. Strong overseas demand for a country's exports creates additional demand for its currency as foreign buyers seek to purchase those goods. This extra demand alone benefits the currency. A positive net Trade Balance therefore supports a currency, while a negative balance has the opposite effect.

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