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Sterling (GBP) outperformed its major peers on Friday as UK retail sales data for September came in stronger than expected. Retail sales, a key measure of consumer spending, rose 0.3% from the previous quarter, while economists expected a 0.3% decline. On an annual basis, the data measuring consumer spending grew strongly, reaching 3.9%, higher than the expected 3.2%. The previous value was revised down to 2.3% from 2.5%.
The ONS said reports showed higher collections at other non-food stores and department stores had helped boost overall sales.
The upbeat retail sales data is expected to partially pare expectations that the Bank of England (BOE) may cut interest rates at each of its two remaining meetings this year. Markets are starting to price in the possibility after September consumer price index (CPI) data released on Wednesday showed inflation fell more than expected and fell below the Bank of England’s 2% target.
Services inflation, an indicator closely watched by Bank of England officials, fell to 4.9%, the lowest level since May 2022. The weakening price pressure in the services sector has boosted traders’ confidence that inflation is gradually being brought under control.
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