Pound US Dollar Exchange Rate News: GBP/USD Climbed on Strong UK Retail Sales

Modified: Friday, 17 February 2023 15:35 BST - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Climbed on Strong UK Retail Sales

Pound (GBP) Buoyed by Strong Retail Sales

The Pound (GBP) wavered initially on Friday morning in the wake of January’s retail sales, but later surged as sales far exceeded expectations.

Against a forecasted second month of declining sales of -0.3%, retail figures came in at an increase of 0.5% in January. Investors were buoyed after retail sales unexpectedly slipped 1.2% in December. The Office for National Statistics (ONS) reported that despite the cost-of-living crisis weighing heavily, consumers didn’t rein in their spending.

However, the concerning undertone, and something that could drag Sterling back down, is troubling food sales continuing to slide. Meanwhile, when compared to pre-Covid pandemic levels, retail sales are still 1.4% behind. Further concerning news is that Darren Morgan, ONS Director of Economic Statistics, has warned that retail sales trends are heading downward:

‘After December’s steep fall, retail sales picked up slightly in January, although the general trend remains one of decline. In the latest month, as prices continue to fall at the pumps, fuel sales have risen.

‘Meanwhile, discounting helped boost sales for online retailers as well as jewellers, cosmetic stores and carpet and furnishing shops. However, after four months of consecutive growth, clothing store sales fell back sharply.’

US Dollar (USD) Supported by Rate Hike Expectations Boost

Meanwhile, the US Dollar (USD) languished against the Pound in the afternoon session, but remained fairly supported by increased interest rate hike expectations.

Federal Reserve policymakers James Bullard and Loretta Mester appeared particularly hawkish in their speeches on Thursday. Both were in favour of more 50bps rate hikes, which saw the ‘Greenback’ rise at the expense of the market mood. Mester said:

‘(The Fed) has come an appreciable way in bringing policy from a very accommodative stance to a restrictive one, but I believe we have more work to do. The incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time.’

GBP/USD Exchange Rate Forecast: Northern Ireland Protocol to Boost the Pound?

Looking ahead, the Pound US Dollar exchange rate could see further movement with further news of the signing of the Northern Ireland protocol deal. With Prime Minister Rishi Sunak arriving in Belfast ahead of the potential deal, Sterling could climb further on an amicable solution to the Brexit deal. A spokesperson for 10 Downing Street said:

‘Whilst talks with the EU are ongoing, ministers continue to engage with relevant stakeholders to ensure any solution fixes the practical problems on the ground, meets our overarching objectives and safeguards Northern Ireland’s place in the UK’s internal market.’

Meanwhile, the US Dollar will head into the weekend on elevated rate hike expectations as the Fed prepares for further economic data. With PMIs expected to remain in contraction territory, gains for the ‘Greenback’ could be limited.

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TAGS: Pound Dollar Forecasts