By Max Clarke
A report this morning revealed that UK retail sales missed expectations for November, recording just a 0.3% rise on the month, against forecasts for a 0.5% rise.
Given the unusually cold and disruptive weather experienced in November it’s not too much of a surprise to see a slightly disappointing figure. An upwardly revised reading of October’s retail sales has also helped sterling hold its pre-release value. Seasonal adjustments, combined with the upcoming VAT rise, should keep sales volumes high this month, although this boost is likely to be short-lived.
Duncan Higgins, senior analyst at Caxton FX says, “The market appears to have glossed over the fact that sales are not quite as positive as hoped, given the recent weather conditions. That October’s reading was revised up is also a positive sign for the fourth quarter.”
The focus is now on a strong figure for December. Aside from the usual seasonal boost, the January 1st rise in VAT should also help to spur high street sales this side of the new year. With this backdrop the forecast for fourth quarter economic growth remains comparatively upbeat, which is helping the pound.”
Higgins adds, “At this stage in the year we’re not expecting sterling to find too much upside traction. With investors winding down heading into the holidays, we expect the pound to remain within range against the euro before resuming its trend higher next year.”
The data has had little market moving impact with the pound continuing to trade just shy of 1.18 against the euro and $1.56 against the US dollar.