The Pound Sterling falls sharply to 1.2670 as UK Retail Sales contracted at a faster pace than expected.
Weak UK Retail Sales data for April suggests a soft inflation outlook.
The US Dollar strengthens after upbeat US preliminary PMI report for May.
The Pound Sterling (GBP) extends its downside to 1.2670 against the US Dollar (USD) in Friday’s London session after failing to keep above the round figure of 1.2700. The GBP/USD pair has come under pressure as the United Kingdom (UK) Office for National Statistics (ONS) has reported a sharp decline in the Retail Sales data for April and the US Dollar extended recovery.
The ONS has shown that monthly Retail Sales declined at a faster pace of 2.3%. Investors forecasted the economic data to have declined by 0.4% from the prior reading of -0.2%, revised negative from a stagnant performance. Annual Retail Sales contracted by 2.7% after expanding at a pace of 0.4% in March, downwardly revised from 0.8%. Economists expected a decline by 0.2%.
Retail Sales data indicate the current status of consumer spending, which accounts for a major part of economic growth. A significant decline in sales at retail stores indicates that the consequences of the Bank of England's (BoE) higher interest rates have deeply impacted consumer spending. Retail Sales data is a leading indicator of the inflation outlook, and weak numbers suggest that price pressures will ease further. This could force the BoE to shift to policy normalization earlier than previously expected.
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