Consumer spending in the United States remains robust, with retail sales climbing 0.4% month-on-month in December, highlighting the resilience of the US economy. The Federal Reserve is under no immediate pressure to lower interest rates, bolstering demand for the US Dollar. Meanwhile, the British pound has experienced a significant decline, dropping 2.5% in January and 8.8% since October 1, amidst a backdrop of weakening UK retail sales.
The pound is currently trading lower on Friday, with the GBP/USD pair at 1.2201, down 0.27% on the day. The pair has recovered slightly from recent lows but faces resistance near the 1.2200 level. UK retail sales saw a decline of 0.3% month-on-month in December, which was slightly better than the forecasted drop of 0.4%. However, quarterly retail sales have fallen by 0.8% in the fourth quarter, reflecting a cautious approach by UK consumers during the crucial Christmas season.
The UK economy posted negligible growth of 0.1% in November, further affecting market sentiment towards the pound. In contrast, annual retail sales in the UK rose by 3.9%, indicating some resilience in consumer spending over the year despite recent setbacks.
In Europe, the Euro is also feeling the pressure as expectations mount for further rate cuts by the European Central Bank. This has contributed to a stronger demand for the US Dollar, as investors seek more stable and favorable economic conditions.