Pound Slides Amid Weak U.K. Retail Sales Data, Border Closure Worries
22 January 2021 - 6:54PM
RTTF2
The pound lost ground against its key counterparts in the
European session on Friday, weighed by weak U.K. retail sales and
PMI data, as well as concerns over the looming border closure to
prevent the spread of new coronavirus variant.
Data from the Office for National Statistics showed that UK
retail sales recovered in December but the pace of growth was much
slower than expected.
The retail sales volume gained 0.3 percent month-on-month,
reversing a 4.1 percent decline seen in November. However, the pace
of growth was weaker than the economists forecast of +1.2
percent.
On a yearly basis, retail sales growth improved to 2.9 percent
from 2.1 percent in November. Economists had forecast an annual
growth of 4 percent.
Another report showed that the U.K. budget deficit widened to
the third highest level on record in December.
Public sector net borrowing, excluding public sector banks,
totaled GBP 34.1 billion in December, which was GBP 28.2 billion
more than in the same period last year.
This was both the highest December borrowing and the
third-highest borrowing in any month since monthly records began in
1993.
Survey results from IHS Markit and the Chartered Institute of
Procurement & Supply showed that the UK private sector logged a
renewed downturn in January as the third lockdown dampened the
services economy and trimmed the manufacturing growth.
The flash composite output index fell sharply to an eight-month
low of 40.6 in January from 50.4 in December. The score was
forecast to rise to 50.7.
U.K. cabinet minister George Eustice said that the government is
mulling full border closure to avoid new strains of virus being
spread in the country.
"There is concern at the moment at the number of mutant strains
... concerns that there's a risk that one day there will be a
strain that might be able to evade the vaccine," Eustice told Sky
News.
The pound reached 1.3652 against the greenback, falling from a
high of 1.3736 seen at 7:00 pm ET. Further decline in the pound may
find support near the 1.34 mark.
The pound dropped to 141.51 against the yen, after a gain to
142.20 at 7:15 pm ET. Should the pound slides further, 138.00 is
likely seen as its next support level.
The pound weakened to 1.2079 against the franc, registering a
3-day low. The pair had closed yesterday's deals at 1.2151. The
pound may locate support around the 1.185 mark.
The U.K. currency was down against the euro, at a 3-day low of
0.8916. At yesterday's close, the pair was valued at 0.8858. The
pound is poised to challenge support around the 0.90 mark.
Flash data from IHS Markit showed that Eurozone private sector
activity contracted at an accelerated pace in January amid the
ongoing pandemic and related restrictions.
The composite output index declined to 47.5 in January from 49.1
in December. The score was seen at 47.6.
Looking ahead, Canada retail sales for November and U.S.
existing home sales for December are set for release in the New
York session.
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