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How important is UK retail sales?

  • Lots of focus this morning on the UK retail sales print with a lot of the moves in global markets being attributed to this morning's release (see our earlier post on the drivers in markets here).
  • The print was very disappointing - but we still think that the overall direct impact on UK monetary policy from today's release will have little real bearing on the overall MPC decision in December (or indeed in early next year). The release is really too volatile to place too much weight on - despite volumes being at their weakest level since February 2021.
  • However, this is yet another sign that the UK economy is slowing down - and follows the lower than expected UK CPI prints and AWE prints earlier this week.
  • And it is not just the UK - the narrative in markets this week has largely been led by concerns of a wider economic slowdown, and a faster pace of disinflation than previously expected.
  • These moves have translated into global money markets as expectations of rate cuts have been brought forward with SOFR futures seeing Reds up to 33 ticks higher this week, SONIA futures up to 29.5 ticks higher and Euribor futures up to 17.5 ticks higher.
  • We have seen some pushback on these ideas from central bankers - notably Greene yesterday stating that markets hadn't clocked on to higher for longer yet.
  • But the overarching theme in markets this week has been weakening demand and earlier cuts - and today's retail sales adds to that narrative.

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