UK retail sales beat forecast, pound edges lower

The British pound has edged lower on Friday. In the European session, GBP/USD is trading at 1.3214, down 0.17% on the day.

UK retail sales climbs 0.4%

UK retail sales were a ray of sunshine in March. Monthly, retail sales rose 0.4%, beating the market estimate of -0.4% but below the revised 0.7% increase in February. Clothing sales showed strong growth as shoppers took advantage of the sunny weather.

Annualized, retail sales rose 2.6% from a revised 1.8% gain in February and above the market estimate of 1.8%. This was the strongest gain in three months.

UK consumer confidence worsens

The strong retail sales was a pleasant surprise but the consumer economy remains fragile. The GfK consumer confidence index deteriorated in April to -23 from -19 and below the market estimate of -22. This was the lowest level since November 2023.

Consumers are concerned over the rising cost of living and worsening global trade tensions which has been fuelled by President Trump's tariffs. The GfK survey found that consumers are anxious that inflation will continue to rise due to the US tariffs.

The Bank of England is following trade tensions carefully as well. On Thursday, Governor Andrew Bailey said that the BoE was "quite focused on the growth shock" for the UK from the tariffs, although he said the UK was not close to a recession. If the global trade war intensifies, it will weigh on UK growth but will also push inflation lower.

US consumer inflation expectations expected to climb

President Trump's tariff policy is expected to raise inflation and consumers are anxious that inflation will rise sharply. The UoM consumer inflation expectations index jumped to 6.7% in the initial April release, up from 5.0% in March. Today's final release is expected to confirm this figure, which would mark the highest level since Nov. 1981.

• GBP/USD is testing support at 1.3313. Below, there is support at 1.3277
• There is resistance at 1.3375 and 1.3411