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24/05/24
164
GBP Flat Despite Drop in Retail Sales
On Friday, the British pound was still having a quiet week during which it has remained close to the 1.27 level. GBP/USD traded at about 1.2715, 0.13% higher in the European session.
Retail spending in the UK dropped in April with a decline of 2.3% m/m. This came after March’s revised 0.2% drop and was much weaker than market estimates of a drop of 0.4%. This was the biggest drop in 4 months, and it was driven by a sharp decline in sales of non-food items and gasoline.
Most sectors reported a sharp decline in sales as unusually rainy weather dampened consumer spending. Retail sales dropped by 2.7% on an annualized basis, after March’s revised gain of 0.4% and missing the market consensus of a 0.2% drop.
The economy in the UK performed well in Q1, with GDP in the first quarter lifting by 0.6% q/q, the strongest quarter in more than two years. The weak retail sales may indicate a weaker Q2, which would support the Bank of England easing the current cash rate from 5.25% which is dampening economic activity.
With inflation in April dropping to 2.3%, the target of 2% is very close and there is speculation that the BoE would begin lowering rates in August.
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