Sterling under pressure after disappointing UK retail sales

Cable is now down on the week as sellers are looking to take a crack at a firmer break under 1.2200 today. The catalyst? A softer UK retail sales report in December during the run up to the Christmas holiday period, even when accounting for the Black Friday sales from November.

That is seeing the pound be the laggard as we enter European morning trade, down across the board.

GBP/USD is now down to 1.2165 and is now poised for a third straight weekly drop. A test of the October 2023 lows of 1.2037 beckons with keener eyes on the 1.2000 mark surely.

A BOE rate cut for the start of next month looks to be a shoe-in now. Traders are pricing in ~81% odds of that, with ~68 bps of rate cuts in total for the year. If you compare that to pricing at the end of December here, you can see why the pound is struggling to start the year. And the selloff in gilts hasn’t helped with the mood whatsoever.

This article was written by Justin Low at www.forexlive.com.