Pound little changed as UK consumer spending falls

Summary:

• UK October retail sales M/M: -0.1% vs +0.2% exp

• Core reading M/M: -0.3% vs +0.2% exp

• GBP mixed with election nominations in focus

Rounding off a disappointing series of UK data points this week, the retail sales figure for October came in worse than expected with sizable misses on several fronts. For the 3 months to October the pace of increase in consumer spending was the slowest since April 2018 with food stores the only main sector to see growth compared to the prior 3 months. The pound was gaining heading into the release but the poor data has capped the advance for now with the attention turning away from economics and back to politics. 

UK retail sales unexpectedly declined in October and are showing signs of strain amongst consumers. Source: Bloomberg 

All eyes on BXP nominations

As politics remains the driving force behind the pound and with there being still just under a month to go under the election, it is not too surprising that the currency is looking a little directionless of late. There could be some activity later today with candidates wanting to stand as MPs required to submit their nomination papers by 4PM. The key thing here is which seats the Brexit party will contest, with speculation rife that they could strike a new election pact with the Conservatives and not only refrain from contesting Tory seats from the last election but also not field candidates in marginal ones. While the further reaching implications of the election outcome remain potentially complex and nuanced, as far as the markets are concerned, anything that boosts the Conservatives prospects would be deemed positive for the pound in the near-term.      

In terms of client interest we saw a big increase in GBP pairs during the strong rally in October but it has since subsided a bit, mainly due to the upcoming election. There’s still a fair bit of activity however and quite interestingly our client sentiment lately has shown an increased appetite for short positions as more people are looking for a pullback ahead of the ballot. The most interest remains in stock indices with the latest events in Hong Kong weighing on equities in the far east, although benchmarks in Europe and the US are still holding up fairly well for the time being.    

The pound is trading in a narrow range this week despite a barrage of data from the UK with politics remaining the main driver. Source: xStation