In a week marked by fluctuating economic indicators, the Federal Reserve hinted at potential rate cuts, mirroring the UK's recent monetary policies. Retail sales in the UK surged 1.7% month-over-month in January, far exceeding the market's expectations of 0.3%. This rebound from December's revised decline of 0.6% bolstered the British pound, which steadied against the US dollar on Friday after a notable 0.6% increase the previous day. Meanwhile, gold prices dipped slightly to $2,930, retreating from the record highs above $2,950 seen on Thursday.
Despite a decline in annual retail sales growth from 2.8% in December to 1%, the figure still surpassed market predictions of 0.6%. However, UK consumer confidence remains low, with only a slight improvement reflected in February's GfK consumer confidence index rising to -20 from -22. The mixed bag of UK PMIs for February further evidences the uneven economic recovery, with the services sector showing a weak expansion as the PMI rose to 51.1 from 50.8.
Across the Atlantic, distinct dynamics are at play in the US and eurozone economies. The EUR/USD pair remained under pressure, declining towards the 1.0450 level on Friday. Investors are keenly awaiting US PMI reports for further insights into the economic landscape. In contrast, US repo rates have become more attractive, with bills expected to appreciate, signaling potential changes in investment strategies.
In January, inflation in the UK surprised analysts by climbing to a ten-month high of 3%. This unexpected increase in the Consumer Price Index (CPI) adds another layer of complexity as policymakers navigate the economic landscape. The upbeat retail sales figures early in the European session provided some support for the Pound Sterling, yet mixed PMI reports capped its upward momentum.
UK retail sales data provided a glimmer of hope amid otherwise tepid consumer sentiment. The monthly climb of 1.7% in January was a bright spot, highlighting resilience in consumer spending despite broader economic concerns. This positive development contributed to stabilizing the British pound against the US dollar on Friday.