GBP slides on weak retail sales data

The British pound fell on Friday after weak retail sales data reminded investors about the gloomy outlook for the British economy.

Sterling was down 0.26% against the dollar at $1.236. That was below a $1.244 peak touched on Thursday, which was itself not far off the highest level since October 2022. At the time of writing, the GBP/USD pair is trading at 1.2374 versus the previous closing rate at 1.23875.

The euro was up 0.29% versus the pound to 87.69 pence, having hit a one-month low of 87.22 pence on Thursday. Data released Friday showed that British consumers unexpectedly cut back their spending in December.

Retail sales volumes fell 1% compared to November, in a sign that inflation and interest rate hikes are hitting consumers hard. It was a far worse performance than the 0.5% increase economists had been expecting.

The pound has risen around 2% against the dollar this year, with investors hoping that falling U.S. inflation means the Federal Reserve’s interest rate hikes – which sent the greenback soaring in 2022 – might soon end.