The GBP/USD pair traded weaker on Friday, trying to recover from yesterday’s losses. So far, it looks like another negative day for Sterling.
UK retail sales disappoint
November retail sales in the United Kingdom were -0.4% compared to 0.3% predicted and 0.9% before. Excluding vehicle motor fuel sales, the core retail sales decreased 0.3% month-over-month vs. 0.3% projected and 0.7% prior.
On an annualized basis, UK retail sales fell 5.9% in November, compared to -5.6% predicted and -5.9% before, while core retail sales were down 5.9% in the same month, compared to -5.8% expected and -6.4% previously.
The volume of automotive gasoline sales decreased by 1.7% in November 2022, following a 3.2% increase in October, and was 8.7% below its February 2020 level.
In November 2022, non-food shop sales decreased by 0.6% and were 1.8% below February 2020 levels.
The amount of food store sales increased by 0.9% in November 2022, with businesses reporting anecdotal evidence that buyers stocked up early for the holidays.
ONS director of economic statistics Darren Morgan said that sales during Black Friday had failed “to provide their usual lift in this sector”.
“However, department stores and households good shops did report increased sales, with these retailers telling us a longer period of Black Friday discounting helped boost sales,” he said.
Furthermore, the seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) decreased to 44.7 in December compared to the projected 46.3 and the final reading of 46.5 in November.
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The Preliminary UK Services Business Activity Index for December was 50.00, compared to November’s final reading of 48.8 and the expected reading of 48.5.
Chris Williamson, Chief Business Economist at S&P Global, commented on the survey
“The December data add to the likelihood that the UK is in recession, with the PMI indicating a 0.3% GDP contraction in the fourth quarter after the 0.2% decline seen in the three months to September.”
BoE hiked rates again
In a decision that was largely anticipated by experts, the Bank of England raised interest rates to 3.50%, a 50bps rise to the highest level since the financial crisis. Two members (Sylvana Tenreyro and Swati Dhingra) voted for no change, but Catherine Mann voted for an increase of 75bps.
The BoE stated that more rate rises might be necessary to reach its 2% inflation target. They said, “if the prognosis indicated more persistent inflationary pressures, it would respond aggressively as required.”
The price is now falling toward the 200-day moving average (near 1.21), while the massive rising wedge pattern (a bearish reversal formation) could still become valid, implying another leg lower for the Pound.