GBP/USD: Cable tumbles on muted UK retail sales and USD recovery

• GBP under stress on muted UK retail sales.
• BOE may be compelled to stay on the sideline.

GBP/USD is now trading around 1.4015 in late New York session, tumbling by almost 0.58% on muted UK retail sales. Moreover, a recovery in the US dollar from a 15 month low is also negative for the cable, that also retraced from its multi-week high of around 1.4143 made earlier today.

USD recovered from late Asian session today after the Japanese government said that it is watching Yen moves with “greater” sense of concern and is ready to act (intervene) when actually needed. Also, overall US economic data was positive for the greenback today.

Today, UK core retail sales for January came muted at 0.1% vs. estimate 0.6% ; prior: -1.5% (MOM); On YOY basis, core retail sales came at 1.5% vs. estimate 2.5%; prior: 1.3%.

Overall, today’s muted UK retail sales may be pointing to a subdued consumer spending as a result of tepid wage growth. But muted retail sales for January may be a seasonal factor also on account of December holidays and  seasonally sales.

In any way, a fatal combination of muted consumer spending (retail sales) and higher imported inflation may be also signaling stagflation in the UK economy. Thus, BOE may be forced to stay on the sideline despite a hawkish hold stance a few days ago.