Pound drops below $1.30 as June Retail Sales Fall
There has been a surprising fall in the pound after a decrease in retail sales in June.
Although the Office for National Statistics expected there to be a 0.2% rise in sales after May, it was reported that sales fell by 0.5%. This resulted in sterling being down nearly 0.7% to $1.2980 against the dollar, which is the lowest it has been since September 2017. It was also shown to be down by 0.28% against the euro at €1.119.
The reasoning for such a fall is thought to have been impacted by the World Cup and the heatwave that the UK experienced in June.
Rhian Murphy, senior statistician at the Office for National Statistics, said “consumers stayed away from stores and instead enjoyed the World Cup and the heatwave.”
Following the inflation figures released, economists were divided on whether The Bank of England would still follow their previous expectations and raise the interest rates in its next meeting on 2nd August.
Tom Stevens from Fidelity International, said: “An August rate hike is in the balance. Whether or not one is delivered, the trajectory thereafter will be extremely shallow.”
Despite this weakness in retail sales in June, the three-month period volumes were still up by 2.1%, which is the strongest quarterly rise since February 2015. So, Ruth Gregory from Capital Economics, said that: “While this week’s unexpectedly weak inflation figures have made the outlook for an interest rate rise in August rather less clear cut, the recovery in the consumer sector supports our view that a hike is still more likely than not.”
June proved a successful period for the sales of food however, as it was shown that sales rose by 0.1%.
Samuel Tombs, from Pantheon Macroeconomics, explained “The World Cup might have helped to support food sales, by encouraging people to stay in rather than eat out.”
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