20/10/2017 - UK Retail Sales Slide in September

GBP

Sterling slid lower yesterday after figures released showed a slowdown in UK retail sales for the month of September, raising serious concerns  over the current trajectory of the UK economy. 

The ONS reported that retail sales volumes fell by 0.8% for the month of September, dragging growth for this quarter down to 1.5%, its lowest year-on-year rate since 2013. Analysts had originally expected the figure to decline by only 0.1%. The weak data has increased the uncertainty surrounding consumer demand and has raised questions over the inflationary outlook for the UK as well as the strength of the economy. In recent days, investors have started to doubt if the Bank of England will raise interest rate at its next meeting on 2 November.

The report also revealed that shop prices over the past year have risen at their fastest pace since 2012 by 3.3% and many analysts have therefore blamed the weak data on rising inflation which has been predominantly driven by a weaker pound since last year’s vote to leave the EU. This has been further reinforced by the latest UK jobs report which on Wednesday showed that wage growth is still lagging behind inflation.

EUR

The euro rallied yesterday after the Spanish government revealed that it is poised to stall Catalonia’s autonomy after leader Carles Puigdemont refused to abandon the push for independence. Ministers yesterday announced that they are due to meet to activate article 155 of the constitution which would allow the government to impose direct rule over the region.

The plans were backed by the Spanish supreme court which declared the October 1 vote invalid and said that it violated the constitution, which renders the country as indivisible. Although article 155 has never been invoked, there are now increasing concerns that the moves could trigger further unrest in the region after mass demonstrations in the run up to the ballot earlier this month.

Key Announcements

All Day: EU Summit