The pound falls to its lowest level in 37 years on weak retail sales

By: News Team

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Sterling fell to a new 37-year low against the dollar on Friday, and a 17-month low against the euro, after weaker-than-expected retail sales figures raised the concern for the health of the British economy.

  • The pound fell more than 1% against the dollar to $1.1351, its lowest since 1985, and its decline accelerated after breaking past a 37-year low hit last week. It later trimmed losses and traded 0.5% lower at $1.1407.
  • The euro rose to 87.66 pence, its highest level since February 2021, then trimmed gains to trade 0.32% higher at 87.48 pence.
  • Retail sales volume fell 1.6% on a monthly basis in August, the Office for National Statistics reported on Friday, the biggest decline since December 2021 and worse than all forecasts in a Reuters poll of economists that they had pointed to a 0.5% drop.
  • This was just the latest bad news for the British currency.

“In the background, everything that’s going on is weighing on the pound, the UK has these massive external deficits and the risks around the policies of the new prime minister are adding to that,” said John Hardy, head of forex strategy at Saxobank.

  • Britain’s new leader, Liz Truss, announced last week a cap on consumer energy bills for two years to cushion the economic impact of the war in Ukraine, with measures likely to cost the country more than $100 billion. pounds ($115 billion).
  • British Chancellor of the Exchequer Kwasi Kwarteng is due to make a tax statement this month to explain how this will be financed, and is also expected to say how he will deliver the tax cuts promised by Truss during his campaign for the Conservative Party leadership.
  • “Also, markets are in risk-off mode following the withdrawal of FedEx forecasts and US equities falling below a key support level,” Foley said.
  • FedEx Corp (NYSE: FDX ) on Thursday withdrew financial forecasts issued just three months ago, sending its shares tumbling and weighing on broader markets.

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