LONDON: The pound edged lower on Friday as uncertainty over the status of peace talks between the US and Iran prompted investors to buy the dollar and after UK data for April showed retail sales fell by the most in nearly a year and Britain’s public finances deteriorated sharply.
This week has brought mixed economic data, including a monthly report on the labour market that showed unemployment is on the rise and real pay growth is barely positive, given the impact of inflation stemming from the Iran war.
Friday’s retail sales data showed sales volumes fell 1.3 percent month-on-month in April, the steepest drop in nearly a year and more than double the 0.6 percent decline economists had expected.
Consumers are cutting back on fuel purchases and discretionary spending, as they contend with soaring energy bills and uncertainty over the war.
“The soaring price at the pump has put pressure on households still fighting back from their last brush with scorching inflation,” Danni Hewson, AJ Bell’s head of financial analysis, said.
“Initially, motorists rushed to fill up as the impact of the Iran war sent fuel prices higher, but as it became clear this was not going to be a short-lived spike, people have regulated their behaviour.
Non-essential journeys have been pared back as consumers once again think hard about how they’re going to spend every penny,” she said.
The pound was down 0.1 percent against the dollar on Friday to around USD1.3420, but still set for a 0.7 percent gain this week. Sterling has shaken off some of the weakness triggered by a political crisis in Britain, where Prime Minister Keir Starmer is under pressure to quit following heavy losses for his ruling Labour party in local elections.
Against the euro, the pound has performed more robustly, having gained nearly 1 percent this week. On Friday, the euro was roughly flat at 0.8646 pounds.