GBP Slips as UK Retail Sales Tank

Pound Under PressureThe British Pound has come under fresh selling pressure today on the back of the latest UK economic data released this morning. UK retail sales were seen plunging lower last month, printing -3.2% from the prior month’s 1.4%, well below the -0.5% the market was looking for. Given that December is typically a strong month due to seasonal spending around Christmas, the data is even more concerning. Coming on the back of hotter-than-forecast UK CPI data earlier this week the data is once again putting the focus on recession risks in the UK.Weakest Retail Sales in 3 YearsThe decline in December sales marks the largest fall in UK spending in 36 months. While part of the weakness can be explained through consumers making earlier purchases in November, ahead of the holiday period, the declines were broad based. Department stores sales saw the largest negative contribution at -7.1% followed by non-food stores at -4.5% and household goods stores at -3%.UK Trade SinksWith the final figure now in, overall trade in 2023 is seen at 2.8%, marking its lowest level since 2018. Given the uptick in inflation and the threat of UK rates rising higher, the near-term outlook for consumption in the UK looks dim, likely to keep GBP sentiment pressured lower.Technical ViewsGBPUSDFor now, the market continues to trade within the 1.2612 – 1.2823 range which has framed price action over recent months. With momentum studies weakening, risks of a downside break are growing. Should we slip back below 1.2612, 1.2437 will be the next key support to monitor.