Pound Falls as Retail Sales Grow at Slowest Pace in Four Years

  • Sterling drops as much as 0.5% after spending misses estimates
  • Data increases risk of one-and-done BOE rate hike: Commerzbank

A collection of five, ten, twenty and fifty British pound banknotes sit in this arranged photograph in London, U.K., on Thursday, Oct. 13, 2016. The U.K. currency is getting harder to trade, and to predict, because the nation’s exit from the European Union has changed the rules of engagement.

Photographer: Miles Willis/Bloomberg

The pound fell as retail sales dropped more than forecast in September, damping the case for more than one central bank rate increase.

Sterling weakened versus most of its Group-of-10 peers as the data showed sales including fuel dropped 0.8 percent from August, well below the median forecast for a 0.1 percent decline in a Bloomberg survey of economists. Annual growth slowed to 1.5 percent in the third quarter, the weakest performance since October 2013.

“The data were quite disappointing indeed, which is putting pressure on the pound,” said  Thu Lan Nguyen, a currency strategist at Commerzbank AG. “I doubt that the Bank of England will now refrain from hiking rates on the basis of this one data point, but it confirms our medium-term view that the upcoming rate hike will be a one-off.”

The retail report came after inflation and labor market figures this week showed consumer-price growth hit the highest in five years amid a tightening job market, supporting the case for the BOE to raise borrowing costs.

The pound fell as much as 0.5 percent to $1.3135, while it weakened for a fourth day versus the European common currency, declining 0.5 percent to 89.69 pence per euro. The yield on the 10-year U.K. government bond fell four basis points to 1.28 percent ahead of a benchmark gilt auction at 10:30 a.m. London time.

    Before it's here, it's on the Bloomberg Terminal.