- GBP/USD refuses to catch pace despite a 0.9% gain in UK’s retail sales in January.
- Excluding fuel, retail sales recorded an even higher 1.6% gain in January.
- Annual sales remained unimpressive with a 0.8% gain in January that was in line with the analysts' estimate.
- Brexit related macroeconomic uncertainty expected to keep GBP/USD under 1.30 level.
The UK’s Office for National Statistics released the monthly retail sales report on Thursday. Following a slow end to 2019, the data suggested 2020 to have started with increased spending from the shoppers in the United Kingdom. Analysts construed Thursday’s report as improved sentiment after PM Johnson’s victory in the general election on December 12th finally beginning to fuel economic activity in the country.
Retail sales volumes gained 0.9% (seasonally adjusted) in January following December’s 0.5% decline. January’s reading was reported as the sharpest gain since last March. In a previous estimate, analysts had anticipated a 0.7% improvement in retail sales in the UK in January.
Retails Sales Gained 1.6% In January Excluding Fuel Sales
Excluding fuel sales, the figure was recorded even higher at a 1.6% increase in January that translated to the largest gain since May 2018 and beat analysts’ estimate with a significant margin.
Experts also commented that following PM Johnson’s victory in the general election that fast-tracked the UK’s departure from the European Union on January 31st, consumer and business sentiment is slowly starting to recover in the UK.
The decline in petrol station sales was printed at 5.7% in January – the sharpest since April 2012 that was largely attributed to higher prices for fuel. Clothing sales, on the other hand, noted the sharpest increase since May 2018 following weakness prevailing through several months in this sector.
Annual sales, however, remained unimpressive at only 0.8% gain that was reported in line with the economists’ estimate. Excluding fuel, the data highlighted a 0% gain in sales from August to December. The streak was registered the weakest since 1996 when record-keeping originally started.
Macroeconomic Uncertainty Expected To Keep GBP/USD Under Pressure
Despite the optimism, the macroeconomic scenario remains uncertain for the United Kingdom with Johnson’s administration trying to strike a broader trade deal with the EU within the current deadline of December 2020.
The optimism of the retail sales report on Thursday was unable to add strength to Sterling in the forex market. Despite the increase in monthly retail sales, GBP/USD lost traction and dropped from a daily high of 1.2925 to a low of 1.2850 following the release of the economic data. In light of the macroeconomic uncertainty regarding the UK’s trade deal with the EU, analysts have recently forecast the currency pair to trade below 1.30 level in the first half of 2020.