Pound Slips As Weak U.K. Retail Sales Reduce BoE Rate Hike Hopes

The pound declined against its major counterparts in the European session on Friday, as the nation's retail sales fell unexpectedly for the fifth consecutive month in September.

Data from the Office for National Statistics showed that the retail sales volume including auto fuel decreased 0.2 percent month-on-month in September, after easing by revised 0.6 percent in August. Sales were forecast to grow 0.5 percent.

Due to falls in household goods stores sales, non-food stores reported a decline of 1.4 percent in sales volumes. Meanwhile, food store sales volumes rose 0.6 percent in September.

Automotive fuel sales advanced 2.9 percent as demand towards the end of September increased sales.

On a yearly basis, retail sales volume declined 1.3 percent, bigger than August's 0.2 percent fall and the economists' forecast of -0.4 percent.

Month-on-month, retail sales volume excluding auto fuel, was down 0.6 percent versus a 0.7 percent fall in August. The decline was in contrast to the forecast of 0.2 percent growth.

Excluding auto fuel, the annual decline in retail sales volume deepened to 2.6 percent from 1.1 percent. The expected fall was 1.7 percent.

The drop in retail sales prompted traders to trim their expectations for a rate hike at the meeting in November.

BoE chief economist Huw Pill said that the November meeting is "finely balanced," adding that there is a possibility of inflation touching 5 percent or above in the coming months.

The pound weakened to a 1-week low of 1.2626 against the franc from Thursday's close of 1.2648. The pound is seen finding support around the 1.25 mark.

The pound depreciated to a 2-day low of 1.3771 against the greenback before rebounding to 1.3814 around 5 am ET. The pair had ended yesterday's deals at 1.3792.

The pound reached as low as 156.84 against the yen, falling from Thursday's close of 157.17. Further fall in the pound may face support around the 149.00 area.

The pound hit a 2-day low of 0.8454 against the euro around 4 am ET, but it has since recovered to 0.8423.

Flash survey results from IHS Markit showed that Eurozone private sector growth eased sharply to a six-month low in October amid rising supply bottlenecks and COVID-19 concerns.

The composite output index dropped to 54.3 in October from 56.2 in September. The reading was expected to fall to 55.2.