Pound Sterling falls following disappointing UK Retail Sales and preliminary PMI data.

The British pound took a noticeable hit against major currencies on Friday, primarily due to disappointing retail sales figures for October in the UK, alongside preliminary S&P Global Purchasing Managers’ Index (PMI) results for November.

The Office for National Statistics (ONS) indicated that retail sales—a key indicator of consumer spending—dropped by 1.1% month-over-month. This was worse than the flat sales that analysts had anticipated. However, there was a revision in September’s index, which rose to 0.7% from a previous estimate of 0.5%.

Year-over-year, retail sales only increased by 0.2%, falling short of the expected 1.5% and also, um, revised down from an earlier projection of 1.5% to just 1%.

The report noted a significant decline in sales from textile clothing and footwear stores, which fell by 3.3% compared to the previous month, contributing to the overall decline in retail sales.

Turning to the UK’s S&P Global composite PMI, it was reported at 50.5, down from October’s closing figure of 52.2. This was below the expected 51.8, indicating a slowdown in business activity. The weak performance of the service sector has really impacted overall private sector growth, which decreased from 52.3 in October to 50.5 now.

Interestingly, the manufacturing PMI has made a return to expansion, hitting 50.2, outperforming the expected 49.3 and the previous measurement of 49.7. A figure above 50 suggests an increase in corporate activity, so that’s a bit of a silver lining.

The sharp decline in retail sales combined with the slowing PMI growth is likely to reinforce the Bank of England’s dovish stance—a perspective that’s already intensified this month as inflation pressures ease and job market conditions deteriorate.

Looking ahead, the key event for the pound will be the Autumn Budget announcement set for November 26, where Chancellor Rachel Reeves is anticipated to raise household income tax in order to address a £22 billion gap in government funding.

Daily Digest Market Trends: GBP falls below USD

• During Friday’s European trading, the British pound slipped to approximately 1.3050 against the US dollar. The GBP/USD pair is under pressure from a stronger dollar, driven by increasing speculation that the Federal Reserve may not cut rates again at its December meeting.
• At the time of writing, the US Dollar Index (DXY), which measures the dollar against six major currencies, is hovering near a five-month high at 100.36.
• According to the CME FedWatch tool, the chance of the Fed reducing interest rates by 25 basis points to a range of 3.50-3.75% at the December meeting has dropped to 33.1% from 44.4% just a week ago.
• Traders seem to be cautious on dovish expectations for the Fed as officials emphasize the importance of curbing inflation, which is still above the central bank’s 2% target. Cleveland Fed President Beth Hammack remarked that high inflation is a “real problem,” insisting that “inflation is still too high and heading in the wrong direction” and that monetary policy should maintain a somewhat restrictive nature.
• Minutes from the October Federal Open Market Committee (FOMC) meeting, released on Wednesday, showed that many officials think interest rates should remain steady in December to tackle inflation.
• Investors are keeping an eye on the preliminary S&P Global PMI numbers for both the UK and the US for November, with expectations of slowed private sector activity in both regions.

Technical analysis: GBP further downside towards 1.2700