| Time | Country | Event | Period | Previous value | Forecast | Actual |
|---|
| 07:00 | United Kingdom | Retail prices, Y/Y | January | -2.4% | -1.4% | 0.7% |
| 07:00 | United Kingdom | Retail Sales (MoM) | January | -3.3% | 1.5% | 3.4% |
| 07:45 | France | CPI, y/y | January | 3.7% | 3.1% | 3.1% |
GBP slipped against most of its major rivals in the European session on Friday as investors reassessed their expectations for the UK’s economy and interest rates following the stronger-than-expected January retail sales report.
The Office for National Statistics (ONS) announced this morning that Britain’s retail sales surged 3.4% MoM in January 2024, rebounding after a downwardly revised tumble of 3.3% MoM (from -3.2% MoM) in December 2023. That represented the largest monthly increase in the retail sales volumes since April 2021 (+8.3% Mom) and was well above economists' forecast of a 1.5% MoM gain. According to the ONS, the January climb in the UK’s retail sales was undermined by increases in all sectors but for clothing and footwear stores (-1.4% MoM).
On the one hand, the January jump in retail sales supported the view that the British economy has some positive impetus at the beginning of 2024 as it surfaces from the recession it slipped into the second half of 2023. Against this backdrop, markets trimmed their bets on how many interest rate decreases the Bank of England will approve this year. According to Bloomberg, markets are now fully pricing in two 25-basis-point reductions and are seeing a 90% probability of the third move, down from 100% a day ago. The first cut is now expected in August.
On the other hand, markets are growing worried about the risks to the economic recovery of the later rate cuts.