Pound Declines Further On Poor Retail Sales

Further to the surprise drop in retails sales, the Pound has fallen further, reaching a new 6 month low against the Euro.

There was a surprise fall in UK retail sales in September of 0.2%. This being further to a 0.7% drop in August.

With the Governement Spending review yesterday and release of the MPC minutes, the Pound has been under pressure this week on the foreign exchange markets.

Duncan Higgins, senior analyst at Caxton FX says, “The problem for the pound is the consistent speculation about quantitative easing (QE).

Any currency that has that prospect hanging over it is likely to underperform.

The MPC minutes revealed that additional stimulus is very much on the agenda, and today’s data is only going to strengthen the case for QE.

Currently the majority of the committee are sitting on the fence but it may not take many more disappointing figures to see a decisive swing in favour of Adam Posen’s camp.”

The pound fell around 1% against the Euro to hit 89.05p, and fell against the US Dollar to $1.5790 after the retails sales data was released.

Whilst Chancellor George Osborne has attempted to curtail state spending, questions are being asked whether he has done enough.

The Institute for Fiscal Studies for example acknowledges we have the deepest cuts since the 1970s, but it warns that the Government may have to go even further with potentially more cuts and tax rises.

For now, the pace of economic recovery appears at best to be slowing and the pressure on the Pound and the likelihood of quantitative easing grows.