GBP/USD: Pound unmoved despite hot January retail figures

The pound was little changed this morning despite stronger-than-expected UK retail sales growth in January. Sterling briefly jumped to $1.2606 against the dollar following the data release but failed to hold the gains.

British retail sales volumes rose 3.4% month-on-month in January, the Office for National Statistics (ONS) said. This was the biggest monthly increase since April 2021 and far exceeded economists’ forecasts of a 1.5% rise.

The data shows consumers’ resilience even as the UK economy entered a recession in the second half of 2023, as confirmed by figures released yesterday.

“After a very weak December, retail sales rebounded in January with the largest monthly rise since April 2021,” said ONS deputy director Heather Bovill. “This means that overall sales have now recovered to pre-December levels.”

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On an annual basis, retail sales were up 0.7% in January. The month saw a 3.4% jump in food store sales, while clothing sales dropped 1.4%. Excluding auto fuel, total retail sales rose 3.2%.

The data suggests consumer spending is weathering increased interest rates well and points to the economy coming out of recession soon, said Capital Economics’ Joe Maher. Sterling was last trading little changed in the session at $1.2590.