UK Retail Sales climb 0.4% MoM in December vs. -0.1% expected

Market reaction to the UK Retail Sales report

The upbeat UK Retail Sales report fails to boost the Pound Sterling. The GBP/USD pair is trading 0.06% lower on the day at 1.3488 as of writing.

Pound Sterling Price Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.05%	0.05%	0.29%	0.00%	-0.17%	-0.03%	0.08%
EUR	-0.05%		-0.00%	0.24%	-0.05%	-0.22%	-0.08%	0.03%
GBP	-0.05%	0.00%		0.26%	-0.03%	-0.22%	-0.10%	0.03%
JPY	-0.29%	-0.24%	-0.26%		-0.28%	-0.45%	-0.32%	-0.20%
CAD	-0.00%	0.05%	0.03%	0.28%		-0.18%	-0.04%	0.09%
AUD	0.17%	0.22%	0.22%	0.45%	0.18%		0.14%	0.25%
NZD	0.03%	0.08%	0.10%	0.32%	0.04%	-0.14%		0.11%
CHF	-0.08%	-0.03%	-0.03%	0.20%	-0.09%	-0.25%	-0.11%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

This section below was published on January 23 at 5:11 GMT as a preview of the UK Retail Sales report.

The UK Retail Sales Overview

The United Kingdom (UK) docket has the Retail Sales data for December to be released by the Office for National Statistics (ONS) on Friday, later this session at 07:00 GMT.

UK Retail Sales are expected to decline by 0.1% month-over-month (MoM) in December, following a 0.1% decline seen in November. On an annualized basis, Retail Sales are seen rising 1% during the reported month, inching higher from the previous increase of 0.6%.

Core Retail Sales, stripping the basket of motor fuel sales, are expected to fall 0.2% MoM, matching the prior decline, while YoY growth may rise to 1.4% from 1.2% in November.

How could the UK Retail Sales affect GBP/USD?

GBP/USD pair may remain silent even if UK Retail Sales data for December come stronger-than-expected, as the Bank of England (BoE) is widely expected to stay put on a gradual easing path, even as price pressures accelerated in December. Focus will be shifted toward the preliminary S&P Global Purchasing Managers’ Index (PMI) data for January from the United Kingdom (UK) and the United States (US) due later in the day.

The GBP/USD pair may regain its ground as the US Dollar (USD) struggles with increased risk aversion, which could be attributed to the geopolitical tensions. US President Donald Trump initially threatened tariffs against European countries opposing his Greenland plan, but later backed down after securing a NATO framework agreement for a potential deal.

Technically, the GBP/USD pair remains steady after gaining more than 0.5% in the previous session, trading around 1.3500 at the time of writing. The pair may target the three-month high of 1.3562 as the next barrier. The immediate support lies at the nine-day Exponential Moving Average (EMA) of 1.3451, followed by the 50-day EMA at 1.3398.

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England’s monetary policy influence Sterling?

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.