The British Pound has remained under pressure on Friday, especially after Thursday’s losses due to disappointing news that the Brexit negotiations have hit an impasse. Today’s (24/07/2020) better than expected retail sales did not help push the pound higher against its major rivals.
Brexit and Covid-19
Despite positive macroeconomic data, the coronavirus pandemic and concerns about the state of the Brexit trade negotiations have weighed on the pound. As the Guardian reported, on Friday morning the release of “the retail figures are doing little to support UK stocks with the FTSE 100 down 1.36% and the more domestically focused FTSE 350 down 0.6%.”
Positive Retail Sales’ Numbers
The easing of lockdown in mid-June helped UK retail sales beat forecasts in June. The Office for National Statistics has reported a 13.9% month-on-month rise in UK retail sales last month, marking an 8% uptick. Even for former Bank of England policymaker Andrew Sentence, the figures highlighted that the UK was on its recovery since the Covid-19 outbreak. The retail sales’ increase was the result of consumers spending for DIY and home improvement products due to the lockdown, with shops selling hardware, furniture and appliances doing particularly well, and reaching near-pre-lockdown sale levels.
With the easing of lockdown measures, consumers preferred real physical shops rather than online shopping, as the ONS noted that the proportion of online sales retreated from its record peak in May. Online spending, however, remained at 31.8%, higher than February’s 20%. UK total retail sales are now just 0.6% lower than February before the lockdown.
ONS deputy national statistician Jonathan Athow said:
“Retail continued to recover from the sharp falls seen in April, with overall sales now almost back to pre-pandemic levels. But there are some dramatic differences in sales across the retail industry. Food sales continue above their pre-pandemic levels due to the closure of cafes, restaurants and pubs. Online sales have risen to record levels, and now count for £3 in every £10 spent. On the other hand, clothing sales remain depressed and across the high street sales in non-food stores are down by around one-third on pre-pandemic levels. The latest three months as a whole still saw the weakest quarterly growth on record.”
With the exclusion of fuel sales, due to the lockdown and limited travelling, the level of sales was 2.4% higher than in February. According to figures, Britain’s economy shrank by more than a quarter in March and April and recovered slightly in May.
Is the UK economy recovering?
Former Bank of England policymaker Andrew Sentence said that the figures highlighted the UK was on its recovery since the Covid-19 outbreak. The Bank of England’s chief economist, Andy Haldane, has also pointed to a V-shaped recovery with the economy growing by around 1% a week, something that many of his colleagues have questioned. The British Retail Consortium said that spending among large high-street chains was 3.4% higher this June than last year.
As investors await the release of more figures to confirm expectations of a sustained economic recovery, the pound will remain under stress with Brexit as well as the growing number of deaths from Covid-19. If you are buying a home overseas or want to transfer funds to family and friends living abroad, get in touch with our friendly Universal Partners FX team. UPFX’s dedicated foreign exchange specialists can help you access the most competitive exchange rates and make your currency transfers stress-free.