The British pound is in negative territory today and has fallen below the 1.2000 line. In the European session, GBP/USD is trading at 1.1956, down 0.23%.
Retail sales slide in June
A busy economic calendar in the UK has wrapped up, with a host of releases. The highlight was June Retail Sales, which posted a sharper decline than the May data. The headline reading came in at -5.8% YoY, down from -4.7% in May (-5.3% est.). Core retail sales were no better at -5.9%, weaker than the May reading of -5.5% (-6.3% est.).
These grim numbers, which point to a continuing decline in consumer spending, shouldn’t be all that surprising. With inflation hitting 9.4% YoY in June, up from 9.1%, surly consumers, pummelled by the cost-of-living crisis, can’t be blamed for cutting back on spending wherever they can. This does not bode well for the UK economy, as consumer spending is a key driver of growth.
UK consumer confidence remains in a deep-freeze. GfK Consumer Confidence remained unchanged at -41, as consumers are clearly very pessimistic about economic conditions. The level of pessimism has increased sharply – a year ago, the index stood at -7.
UK PMIs softened in July, although they were within expectations. Manufacturing PMI dipped to 52.2, down from 52.8 in May, while, Services PMI fell to 53.3, lower than the 54.3 reading in May. Both sectors remain in expansion territory, which is above 50.0. Still, weaker activity in these key sectors will not please investors, who have plenty to worry about when it comes to the UK economy.
The markets are eyeing the next Bank of England meeting on August 4. Governor Bailey is under strong pressure to ratchet up rates in order to curb soaring inflation, but the economy has been struggling and higher rates could result in a recession. The BoE has been very cautious, delivering four straight modest hikes of 25bp, but it may be time for Bailey to dig deeper in the tool kit and implement a 50bp hike at the August meeting.
GBP/USD Technical
- GBP/USD faces resistance at 1.2018 and 1.2167
- There is support at 1.1889 and 1.1740