GBP: retail sales slump but Merkel offers hope of UK-EU trade talks

It was a bad day for sterling and the wider UK economy as UK retail sales came in much worse than expected. While a slump was expected, the forecasted figure was a drop of 0.3% but it came in at 0.8%. There are repeated signs now that the UK economy is slowing and the City will soon lose confidence in sterling if the trend continues. The precise reasons for the dramatic drop are unclear, but the squeeze to British households can’t be helping matters, and nor can reports suggesting that prices have risen by 3.3% over the last year or so.

However, it wasn’t all bad, as German president Angela Merkel appeared to raise hopes of Brexit talks being able to move on to discuss future trade negotiations by December. This represents quite a breakthrough, as Germany is the largest economy in the eurozone, so Merkel’s words arguably carry more weight than some of her European counterparts. Whether the promise materials into reality is another thing, but let’s take the positives for now.

In an otherwise quiet day for economic data, we’ll see the release of the public sector net borrowing.