UK Retail Sales Confirm Slowest Growth Since 1998

Following Chinese GDP in the morning, there was really little else to talk about during the day’s trading. David Cameron was set to speak in Amsterdam about the future of the UK in the EU, but there was a last minute change of plan which saw the PM postpone the meeting to deal with the escalating situation in Algeria.

UK retail sales figures for December didn’t do Cameron any favours, with the potential threat of more bad news coming in the form of UK GDP this Friday. Sales dropped by 0.3% last month vs expectations of a 0.1% gain. Clothing and footwear were the worst performers. It confirmed a poor year for the UK, an annual increase of 1.1% is the weakest figure we have seen since 1998. Being the eternal optimist, early indicators for January are already pointing towards an improvement.

GBPEUR slipped to the low 1.19’s breaking below the 1.19 over the weekend. GBPUSD fell below 1.59 for the first time in 9 weeks. The outlook for the UK isn’t too promising at present, but I don’t think anybody expected GBP to fall so fast so quickly. One would expect sterling to find a floor around these levels for an extended period of time, but that doesn’t seem to be the case at present. The rapid devaluation we have seen of late in sterling isn’t doing much for confidence in the economy. With Q4 GDP this Friday there is a growing feeling that the powers that be need to pursue some form of damage control. It’s kind of like the anticipation of getting a slap on the face, you know it’s coming and you just want to get it over with.

We have a slow day on the cards today with the US closed for business as they celebrate Martin Luther King Day, while President Obama gets inaugurated in the afternoon. The Bank of Japan will give its monetary policy verdict on Tuesday, while we build towards UK GDP on Friday.