The pound has dropped against the dollar slightly down to the dollar having dropped 0.6 per cent
Sterling is currently at around 1.279 against the US dollar, only -0.6 per cent lower than its starting levels but down from the weekly best of 1.285 struck on Tuesday.
According to data released by the Office for National Statistics (ONS) Britain’s retail sector struggled last month as sales including auto fuel reportedly contracted -1.8 per cent in March.
It marks a dramatic decline following the 1.7 per cent growth seen the month before and a much steeper drop than the -0.2 per cent dip predicted by economists.
The downturn caused first quarter sales to slump by -1.4 per cent, the largest quarterly decline since 2010 and the first contraction since 2013.
The sudden fall was blamed on weak wage growth and the decline in the value of the pound over the last nine months, which has led to a sharp rise in inflation.
Richard Lim, chief executive of Retail Economics said: “This latest data shows that the surge in inflation is putting retailers under intense pressure with the first quarterly decline in retail sales since 2013.
“Families are facing the fastest rise in living costs for over three years and they are reining in their spending rapidly.”
Families are facing the fastest rise in living costs for over three years
Analysts suggest this downtrend is likely to continue into the second quarter, albeit at a slower place as the gap between inflation and wage growth grows, leading to consumer consumption easing.
However sterling’s decline was slowed by comments from Michael Saunders, a member of the Bank of England’s Monetary Policy Committee, who suggested he was moving closer to voting for a hike in interest rates as he predicts a steady increase in inflation will require the bank to hike rates from a record low of 0.25 per cent.
Britain’s retail sector struggled last month with sales shrinking by 1.8 per cent
Meanwhile, the US dollar fluctuated on Friday afternoon following the release of mixed US data, which included positive existing home sales figures but less-than-impressive manufacturing and services PMIs.
Sales of previously-owned homes leapt 4.4 per cent from 5.47m to 5.71m in March, reaching a new ten-year high and sailing past initial expectations that sales would only reach 5.6m.
However the National Association of Realtors continued to point to a lull of supply as a major worry for the sector as it drives prices higher and hinders first time buyers attempting to enter the market.
The dollar gained on the pound despite America’s manufacturing slowdown
NAR Chief Economist Lawrence Yun also raised concerns over future policy matters as investors hope that congress will approve new housing finance reforms to replace the ageing Fannie Mae and Freddie Mac associations.
Meanwhile, Markit’s manufacturing PMI dropped from 53.3 to 52.8, closer to the 50 line separating growth from contraction.
The services equivalent also dipped from 52.8 to 52.5. Both measures had been expected to show improvement.
The dramatic retail drop off was blamed on poor wage growth and the weak pound
The news that US private sector growth eased to a seven-month low could prevent the Federal Reserve from increasing interest rates in the near future.
Looking ahead, the GBP/USD exchange rate may suffer next week as an expected drop in both British business and consumer confidence is likely to pressure the pound.
Meanwhile the US dollar may also slip on Tuesday if data shows that US new home sales tumbled from 592,000 to 582,000 in March as expected.