UK Retail Sales Top Estimates, Dollar Index Strengthens

Published on
  • UK retail sales rose 0.6% month-on-month in October, compared to expectations of 0.3%
  • Dollar index has stabilised around 106.5 following strong US retail sales and hawkish Federal Reserve comments
  • Hundreds of staff quit Twitter after Elon Musk’s demands
  • Brent crude set to end the week sharply lower on tough monetary tightening concerns

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Retail Sales In The UK Rise

Retail sales in the UK have come in much better than expected, buoyed by increases at secondhand stores and auctioning houses. In these uncertain times when people’s pay packets aren’t stretching as far as usual, it seems consumers are looking for alternative ways to get their hands on what they want.

This trend does point out just how tough things have become though – switching to second hand on this scale is no small shift in behaviour. Food sales also fell 1%, as soaring food prices dented volumes.

As we head into the festive trading season there’s a very real chance some of the UK’s big supermarkets are going to be hit hard, with expectations perhaps not living up to reality. It’s also important to remember that overall, retail sales volumes are still below pre-pandemic times.

With money being taken out of the economy thanks to yesterday’s tax increases, consumers are likely to rein in expenditure sooner rather than later. This would cause short-term pain for shops, but should ultimately help to bring inflation down, which would be good news for the wider economy.

The US dollar index has stabilised at around 106.5, which has been supported by strong US retail sales. Comments from the Federal Reserve which suggest a policy shift on interest rates is unlikely have also supported the index.

Ultimately though, the dollar index is floating around three-month lows largely because of weaker than expected US inflation data.

That said, the most dramatic of moves are likely to have been reserved until traders have confirmation of a trend, which won’t be known until November and December’s inflation readings have been announced.

Twitter Mass Exodus

Elon Musk’s hardcore working culture changes have seen hundreds of Twitter employees resign. For users there are concerns the mass exodus could result in Twitter’s functionality suffering.

While we’re not seeing outages just yet, there are questions about how the platform will function with a gaping hole in the workforce. Mr Musk is adamant there are no issues and considering the workforce was due to be halved by its new owner, there’s every chance the platform will soldier on for now.

Late last night Twitter told staff all office buildings will be shut until Monday. This suggests further lay offs are coming. For those members of staff that did vote with their feet on the new demands, it proves as a stark reminder to employers of how society has changed. Flexibility and working from home are now must, not nice, to-haves.

Brent crude is trading at around $89 dollars a barrel, as demand concerns outweigh supply constraints. Specifically, it’s uncertainty around significant monetary tightening from the world’s largest economies causing the blip.

The Fed’s comments that there’s still a long way to go to get inflation under control, and the continued expectation of steep interest rate rises means further heat’s going to be taken out of economies, leading to weaker demand for the black stuff.

Article by Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown