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The British Pound hit its lowest level against the Dollar since May after UK retail sales added to the losses that followed Thursday's Bank of England decision.
New data from the ONS shows the UK consumer remains cautious and retail businesses are under pressure, providing fresh evidence the economy has entered a downturn.
Retail sales recovered from -0.7% month-on-month in October to record growth of 0.2% m/m in November; however, the figure disappointed market expectations (0.5%). Remember, November is supposed to be a big month for UK retail businesses with its Black Friday event.
On an annual basis, retail sales fell from 2.0% year-on-year in October to 0.5% in November, which is less than the consensus expectation of 0.8%.
Retail sales are a major driver of the UK's service sector-based economy and signal how demand and sentiment is evolving. Therefore, the undershoot in the numbers offers yet another disappointment and confirms the economy has lost significant momentum into year-end.
In fact, the Bank of England said on Thursday it had slashed its growth forecast for the final quarter of 2024 from 0.3% to 0%.
Sensing a slowdown, three members of the Bank's nine-strong Monetary Policy Committee voted to cut interest rates. This surprised the Bank and suggests that it thinks it will need to cut interest rates further in the coming months to support a struggling economy.
These members can now point to the soft retail sales data as evidence of weak demand, which would potentially limit fears of another spike in inflation.
The Pound to Euro (GBP/EUR) exchange rate fell 0.60% on Thursday and is a little softer following the retail numbers at 1.2049. The Pound to Dollar (GBP/USD) exchange rate this morning hit its lowest level since May at 1.2474.
An original version of this article can be viewed at Pound Sterling Live