Pound Sterling Firms vs Euro and Dollar on Strong UK Retail Sales

May 13, 2025 - Written by Frank Davies

STORY LINK Pound Sterling Firms vs Euro and Dollar on Strong UK Retail Sales

The Pound Sterling held firm against the Euro and US Dollar after further evidence of a weaker UK labour market was offset by much more substantial than expected UK Retail Sales growth for April 2025.

The Pound to Euro (GBP/EUR) exchange rate traded at 1.1885 and closed to fresh 5-week highs.

ING remains bullish on the Pound ahead of the May 19th UK-EU summit; “Expect sterling to stay bid ahead of that – potentially even seeing EUR/GBP break below 0.84.” (GBP/EUR Above 1.19.)

The latest labour-market data recorded an increase in the unemployment rate to 4.5% in the three months to March from 4.4% previously, in line with consensus forecasts, and the highest reading for close to four years.

The number of people on payrolls declined a provisional 33,000 for April after a 47,000 decline the previous month while vacancies declined for the 34th successive month.

Headline wages increased 5.5% in the year to March from a revised 5.7% previously and significantly above consensus forecasts of 5.2% while underlying earnings slowed to 4-month low of 5.6% from 5.9% and marginally below expectations of 5.7%.

Liz McKeown, ONS director of economic statistics, commented; “Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors now showing little difference.


She added; “The broader picture continues to be of the labour market cooling, with the number of employees on payroll falling in the first quarter of the year. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months.”

ING commented; “In short, the UK labour market is slowing, not collapsing, and that is translating into a steady fall in wage growth.”

Real wages increased 2.6% over the year which will help underpin consumer spending.

The British Retail Consortium (BRC) recorded a strong 6.8% increase in like-for-like sales in the year to April after a 0.9% gain the previous month.

There were distortions from the timing of Easter, although March and April sales combined recorded a 4.3% annual increase.

Clothing sales were boosted by favourable weather conditions during the month.

Barclaycard data showed consumer card spending rose 4.5% year-on-year, the largest increase since June 2023 with a real-terms increase for the first time in over two years.


According to Barclays strategist Julien Lafargue; “economic sentiment was surprisingly positive even amid uncertainty around the impact of US tariffs on the economy.”

He added; “The recent decision by the Bank of England to further lower interest rates should add to this momentum. Similarly, the trade agreement reached between the US and the UK should provide some much-needed visibility to businesses.”

In comments on Monday, Bank of England MPC member Taylor stated that the neutral level of interest rates is 2.75-3.00% with rates, therefore still a long way above this level.

According to Taylor, erosion of business confidence has continued and that there is a sense of caution and concern.

The remarks were clearly on the dovish side, but Greene and Lombardelli were more cautious over inflation.

ING commented after the earnings data; “The Bank of England will want to see this trend continuing for a few more months before it becomes more confident on the wage story. Until then, next week’s services inflation number will be much more consequential, given that April’s data is when the big annual price hikes kick in.”

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TAGS: Pound Euro Forecasts