MAs Hold GBP/USD, As Mixed UK Data Doesn’t Suggest BOE Base Rate Change

The British pound sterling held better than other currencies in January, and the retreat last week after the FED meeting stopped at MAs. This week’s UK data started pretty bad but ended good, leaving the BOE (Bank of England) where it was previously. The GDP report earlier showed that the UK economy fell into a recession.

But the retail sales report on Friday was quite strong, showing the biggest jump in almost 3 years. Headline sales jumped by 3.4 percent last month, coming from a 3.3% fall in December, which was strange considering the Christmas period. This has left the Bank of England unmoved, as several members pointed out in the later part of the week. GBP/USD rebounded off the 100 SMA (green) on the daily chart, and it seems like the coming week might offer some upside price action in this forex pair.

UK January Retail Sales Data Released by ONS – 16 February 2024

Retail sales surged by 3.4% in January, surpassing expectations of a 1.5% increase. This significant rebound follows a record decline of 3.2% in December. The revised figure for December is slightly improved at -3.3%. On a yearly basis, retail sales increased by 0.7% in January, defying expectations of a 1.4% decline. This positive YoY growth contrasts with the previous month’s contraction of 2.4%. Retail sales, excluding autos and fuel, also showed strong growth. MoM sales increased by 3.2% in January, exceeding expectations of a 1.7% rise. The revised figure for December is slightly lower at -3.5%. YoY sales for this category grew by 0.7%, surpassing the anticipated decline of 1.6%. The previous month’s YoY figure is revised to -2.1%.

The breakdown of sales by subsectors indicates widespread growth, with increases observed across all categories except clothing. This suggests a broad-based recovery in consumer spending, contributing to the overall positive performance of retail sales. Overall, the rebound in UK retail sales in January reflects a strong start to the new year, with consumer spending bouncing back from the slump experienced in December. The robust growth in retail sales across various sectors underscores improving consumer confidence and economic conditions in the UK.

Bank of England Member Pill Comparing the US with the UK

• The UK labour market is tight due to both poor supply and robust demand
• Sluggish activity is not causing inflation to fall much.
• We have gotten encouraging news on headline inflation, but need to look at persistent components as well.
• There is limited sign of inflation reverting to the target level and wage growth slowing down as needed.
• Reducing bank rates is “still some way off”

GBP/USD Live Chart