Weak UK Retail Sales and GDP Data Fuel Rate Cut Speculation
Written by
Daily Currency Update
The British pound extended its decline, approaching its lowest levels against a basket of currencies since late 2023, as disappointing retail sales data heightened expectations of a potential Bank of England rate cut.Retail sales unexpectedly fell by 0.3% in December, reversing a modest gain in November and missing forecasts for a 0.4% increase. This adds to concerns about the UK’s economic resilience, as GDP growth for November was a mere 0.1%, below expectations, while growth for the three months to November showed no progress at all.
This uncertainty weighs heavily on the pound, with markets factoring in the possibility of looser monetary policy, which could put further pressure on GBP against major currencies.
Key Movers
In the US, Thursday's data release showed an increase in retail sales for December, signalling robust consumer demand. This reinforces the view that the Federal Reserve may adopt a cautious stance toward cutting rates in 2024.The strong retail performance supports expectations of sustained economic resilience, which could bolster the dollar in the short term. However, the Fed’s projections indicate two potential rate cuts in 2025.
Expected Ranges
- GBP/USD: 1.2135 - 1.2215 ▼
- GBP/EUR: 1.1785 - 1.1865 ▼
- GBP/AUD: 1.9575 - 1.9665 ▼
- EUR/USD: 1.0245 - 1.0335 ▼