“December retail sales miss forecasts, boosting market bets on a softer BoE monetary stance.”, — write: www.fxempire.com
According to the Office for National Statistics,
- Non-store retailing and food store sales declined by 1.9% and 1.9%, respectively.
- However, Textile Clothing & Footwear Store sales had the largest contribution, surging by 4.4%, while Department Store sales increased by 1.2% in December.
- Retailers attributed rising Department Store and Household Goods sales to stronger Christmas sales.
- Automotive fuel sales rose 1.6%.
- Retail sales volumes declined by 0.8% quarter-on-quarter in Q4 2024 but were 1.9% higher compared with Q4 2023.
Will the Bank of England Cut Rates in February? The pullback in retail sales could dampen demand-driven inflation, boosting expectations of a February BoE rate cut. Notably, the BoE kept rates at 4.75% in December, citing ongoing inflation concerns.
However, signs of cooling inflation have emerged. The UK annual inflation rate eased from 2.6% in November to 2.5% in December, with the core inflation rate dropping to 3.2%. Softer inflation has fueled bets on a February rate cut, with the UK economy also underperforming. In November, the economy expanded by 0.1%, below a 0.2% consensus.
Today’s retail sales further reinforce expectations of a more dovish BoE rate path. According to a January Reuters poll, all surveyed economists expect a 25 basis point February rate cut. 60% of economists predict the BoE will cut rates four times in 2025.
GBP/USD Reacts to the UK Retail Sales Report The pound responded swiftly to the disappointing retail sales data. Ahead of the UK retail sales data release, the GBP/USD briefly climbed to a pre-report high of $1.22439 before falling to a low of $1.22054.