Sterling weakened on Friday afternoon after poor retail sales data added to expectations of a rate cut this month. Retail sales fell 0.6% month-on-month and increased 0.9% year-on-year, missing market expectations of 2.6%. Sterling also came under increasing pressure against the dollar due to upbeat US housing data.
In Brexit news, Number 10 revealed on Friday that EU citizens will not automatically be deported if they fail to sign up to the settled status scheme by the 2021 deadline. Chancellor Sajid Javid also said over the weekend that there would be no alignment with EU regulations once Britain’s exit from the European Union was made official. He added that the Treasury would not lend support to manufacturers that favour EU rules as the sector had had three years to prepare for Britain’s transition.
This week, Claimant Count Change and unemployment rate data will be released, followed by a series of PMI data on Friday. Pay growth will also come in tomorrow, and is expected to be slightly lower following poor inflation figures last week. Any poor data could have an impact on sterling ahead of the Bank of England’s interest rate meeting at the end of the month. Money markets are currently pricing in a 70% probability of a cut, a huge jump from 5% two weeks ago.
