The dollar made a strong comeback to 4-week highs on Monday, which added pressure to the GBP/USD exchange rate, which fell to lows just around 1.2000.
US Jobs Data Keeps Increasing Dollar Demand
The spike in payrolls, in particular, renewed expectations that the Federal Reserve might need to raise interest rates more quickly.
With Chair Powell due to outline the economic forecast on Tuesday, statements from Federal Reserve members will be widely monitored in this context.
The surprising strength of the US employment data provides Powell plenty of flexibility to sound more hawkish than anticipated, according to ING. However, it appears that markets have already prepared themselves for some backlash against expectations for reducing rate expectations.
There is currently not much justification for the Fed to change its current course, continued Commerzbank.
Declining Retail Sales Volumes
According to the British Retail Consortium (BRC), retail sales increased by 3.9% over the previous year to January from a like-for-like growth of 6.5%.
From a year earlier, when total sales were up 6.9%, they rose 4.2% this year.
The figures suggested a severe fall in volumes given that retail prices were reported to have increased 8.0% over the year.
Retailers experienced the January blues as sales growth slowed as the holiday euphoria disappeared, according to BRC Chief Executive Helen Dickinson.
According to Barclays research, consumer spending climbed by 9.7% in the year to January, and consumer confidence reached its highest point since July 2022.
UK Housing Prices Remain Stable
Despite projections for a further 0.8% decrease, Halifax announced that UK home prices remained stable in January after declining by 1.3% the previous month.
Prices are 4.0% below their high levels, and the year-over-year rate reduced to 1.9% from 2.1% earlier.
A slower housing market was anticipated, especially in comparison to the recent years’ rapid growth, according to Kim Kinnaird, Director of Halifax Mortgages. “We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market,” she said. That trend is probably going to continue until 2023 as lower demand and increased borrowing prices are the result.