The pound fell on Friday against the US dollar following disappointing UK Consumer Confidence data for June and Retail Sales data for May. UK consumer confidence has fallen to its lowest level since records began 50 years ago, as the cost-of-living crisis has hit households. UK Retail Sales fell more-than-expected on YoY but rose on MoM.

On the political front, Conservatives’ Chairman Oliver Dowden resigned after a defeat in UK by-elections. The release of disappointing UK Retail Sales have raised concerns about the economic outlook, while the Conservative party’s defeat has also put more weight on the pound.

Later today, Bank of England Chief Economist and Executive Director Huw Pill’s comments will be closely watched and could provide further direction to the pound.

Consumer confidence falls

Research company GfK’s monthly survey of Consumer Confidence Index dropped one point to -41 in June, hitting a new record low this month. People’s personal financial expectations fell sharply as inflation pinched their incomes. Measures of changes in personal finances and general economic situation over the last year and the next year all dropped. Joe Staton, Client Strategy Director at GfK explained that people were responding to the new economic situation in Britain and “history shows that consumers will not hesitate to retrench and tighten their purse strings when the going gets tough.” He said: “With prices rising faster than wages, and the prospect of strikes and spiralling inflation causing a summer of discontent, many will be surprised that the index has not dropped further. The consumer mood is currently darker than in the early stages of the Covid pandemic, the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there’s talk of a looming recession.”

Retail sales fall in May

More disappointing news also weighed on the pound. Retail sales fell in May due to the rising cost of living which led consumers to cut back on food shopping. Retail sales volumes fell by 0.5% in May from April, according to figures released from the Office for National Statistics (ONS).

The fall in sales volumes was driven by reduced spending in food stores which fell by 1.6% month-on-month.

UK Retail Sales improved from -0.7% that was expected to -0.5% MoM, but the fall in the yearly numbers from -5.7% in previous readings to -4.7% has pushed the pound lower.

On Thursday, the release of the UK S&P Global PMIs also triggered concerns about the UK’s economic growth.

Conservative defeat

The Conservatives lost 2 safe seats on Friday, dealing a harsh blow to the party and adding more pressure on the British currency. The double defeat exposed the party’s weaknesses and could renew talk of another no-confidence vote against the prime minister. The Liberal Democrats party won the Tiverton and Honiton seats while the Labour party won in Wakefield. The Conservative Party Chairman Oliver Dowden resigned after the disappointing results. The double defeat after the by-elections on Thursday is another hit to the Prime Minister who survived a no-confidence vote in his party earlier this month. While the defeat could revive talk of another no-confidence vote, Johnson should be safe until next June.

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