The British pound is struggling at multi-year lows because of weak economic data indicating persistent challenges in the UK economy. December's retail sales were disappointing, contracting by 0.3%, and quarterly sales for Q4 showed a decline of 0.8% from Q3. This signifies a precarious consumer sentiment, despite a year-on-year rise of 1.9% in retail sales for Q4 2024.
The sharp drop in food store sales to the lowest levels since April 2013 indicates weak performance in essential spending categories. Meanwhile, non-food retail, particularly clothing, showed a resurgence with a 4.4% increase in December sales, suggesting a notable shift in consumer priorities towards discretionary spending.
The future of the pound will be determined by upcoming economic indicators such as unemployment and consumer confidence rates. Negative data could further weaken the currency, whereas any unexpected positive outcomes might only temporarily bolster it. With expectations of a potential rate cut by the Bank of England looming, UK bond yields are also under pressure.
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