Pound Sterling weakens as UK Retail Sales contract at faster-than-expected pace

The Pound Sterling faces a sharp sell-off as UK Retail Sales declined at a faster-than-projected pace in October.

Weak UK Retail Sales data could boost BoE dovish bets for December.

Investors await the flash S&P Global PMI data for both the UK and the US.

The Pound Sterling (GBP) weakens against a majority of its peers, except Asia-Pacific currencies, as the United Kingdom (UK) Retail Sales data for October contracted at a faster-than-expected pace. The British currency trades near 1.2550 against the US Dollar (USD) in Friday’s London session, a six-month low.

Retail Sales, a key measure of consumer spending, declined by 0.7% compared with the previous month. In September, sales increased by a marginal 0.1%, downwardly revised from the 0.3% previously reported. Year-on-year, Retail Sales grew by 2.4%, less than the estimates of 3.4% and the former release of 3.2% (downwardly revised from 3.9%).

Weak Retail Sales data is expected to boost expectations of interest-rate cuts by the Bank of England (BoE) in the December meeting as they highlight weakness in consumer spending, a key growth factor for the UK economy.

Still, for now, traders expect the BoE to leave interest rates unchanged at 4.75% not only in the December meeting but also in the one to be held in February. This is because UK inflation data came in hotter than expected in October, with services inflation – a closely watched inflation indicator by BoE officials for decision-making on interest rates – rising to 5%.