Pound Declines As UK Retail Sales Drop Unexpectedly

The pound fell against its major counterparts in early European deals on Friday, as the nation's retail sales declined unexpectedly in December, raising concerns about the economic outlook.

Data from the Office for National Statistics showed that the retail sales volume logged a monthly fall of 1.0 percent after easing by a revised 0.5 percent a month ago.

This was in contrast to economists' forecast for a 0.5 percent increase and marked the second consecutive contraction.

Excluding auto fuel, retail sales decreased 1.1 percent, which was bigger than November's 0.3 percent fall. Sales were expected to rise 0.4 percent.

On a yearly basis, overall retail sales declined 5.8 percent, following a 5.7 percent drop in November and also larger than the 4.1 percent expected fall.

Excluding auto fuel, the annual fall in retail sales deepened to 6.1 percent from 5.6 percent in the previous month. Economists had forecast a 4.4 percent drop for December.

The pound weakened to 1.2351 against the greenback and 0.8780 against the euro, from its early highs of 1.2397 and 0.8737, respectively. The next possible support for the pound is seen around 1.20 against the greenback and 0.89 against the euro.

The pound edged down to 159.01 against the yen, from a 2-day high of 159.97 hit at 12:45 am ET. On the downside, 157.00 is possibly seen as its next support level.

Although the pound weakened to 1.1312 against the franc after the data, it rebounded shortly afterwards and touched a 1-week high of 1.1365. The pound is seen finding resistance around the 1.15 level.

Looking ahead, U.S. existing home sales for December will be featured in the New York session.