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GBP Price May Slip Further as Weak UK Retail Sales Compound Brexit Woes

GBP Price May Slip Further as Weak UK Retail Sales Compound Brexit Woes

Martin Essex, MSTA, Analyst

GBP price, news and analysis:

  • UK retail sales data for September came in below expectations.
  • However, rising real wages will likely boost consumer spending in the next few months.
  • Still, GBP is unlikely to benefit as the Brexit talks continue to make little progress.

UK retail sales weaker than expected

UK retail sales growth fell to 3.0% year/year in September from an upwardly revised 3.4% in August but will likely firm in the coming months, boosting the UK economy overall. News earlier this week that UK average weekly earnings climbed by 2.7% year/year in August, a higher figure than both the previous 2.6% and the expected 2.6%, will likely ensure that consumer spending picks up.

That 2.7% growth in earnings is higher than the 2.4% September inflation rate, meaning wages are now expanding faster than inflation and this rise in real earnings should be positive for GBP.

However, the latest Brexit talks between the UK and the EU made little progress, with the only development a comment from UK Prime Minister Theresa May that London is willing to discuss an extension of the transition period after the UK leaves the EU, although she added that she does not plan to use it. May added that she expects this transition period to conclude at the end of 2020, well after the March 29, 2019 date when the UK will cease officially to be an EU member.

GBPUSD Price Chart, Five-Minute Timeframe (October 17-18, 2018)

Latest GBPUSD price chart.

Chart by IG

The retail sales data for September showed they were lower year/year than both the previous 3.4% and the predicted 3.6%, while month/month sales dropped by 0.8%, worse than both the previous +0.4% and the predicted -0.4%. The 0.8% fall was largest monthly drop since March, largely because of poor food sales.

There was little reaction to the data, however, with GBPUSD edging higher in their wake after its losses on Tuesday and earlier Wednesday.

More to read:

What effect will Brexit have on the FX markets?

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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