The UK’s Office for National Statistics (ONS) has revealed that retail sales in August increased by 0.4%, marking a recovery from July. However, this growth fell short of expectations, as economists had anticipated a more substantial rise of 0.5%.
The unexpected shortfall in retail sales figures exerted downward pressure on the British pound, which weakened to a rate of 1.2269 pounds per US dollar during afternoon trading.
The depreciation of the pound continued following the surprise announcement by the Bank of England (BoE) on September 21. Contrary to analyst predictions, the BoE decided to maintain the interest rate at its current level of 5.25%, foregoing an anticipated 0.25% increase.
This decision by the BoE marked the conclusion of a streak of 14 consecutive interest rate hikes, initiated in December 2021 as part of the bank’s efforts to curb inflation. Over this period, interest rates had steadily climbed from 0.1% to reach the current 5.25%, the highest level observed in 15 years.
The unexpected monetary policy stance by the BoE has introduced a new element of uncertainty into the UK’s economic landscape, with the central bank choosing to pause its tightening cycle amid evolving economic conditions. As the pound faces fluctuations and investors adjust their expectations, the future trajectory of both retail sales and the British currency will be closely monitored by economists and market participants alike.