Pound Sterling Slides As UK Retail Sales Fall Sharply In June
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The British pound (GBP) faced notable pressure today, sliding against both the US dollar and euro after UK retail sales figures for June came in significantly worse than expected. According to the Office for National Statistics (ONS), retail sales volumes fell by 1.2% in June 2025, marking the sharpest monthly decline this year and well below market expectations of a 0.4% drop.
The disappointing data highlights growing concerns over the health of the UK economy, as persistent inflation, elevated interest rates, and weakening consumer confidence continue to weigh on household spending. Notably, food store sales fell by 1.5%, while non-food retailing—especially clothing and household goods—saw declines of over 2.1%, pointing to a broad-based contraction.
In response to the data, the pound dropped to $1.2610, its lowest level in over two weeks, and also slipped against the euro to €1.1675. Analysts at ING commented that the soft retail numbers are likely to reinforce dovish expectations for the Bank of England (BoE), which has already signaled it may be nearing the end of its rate-hiking cycle.
“Today’s release is a clear warning sign that the UK consumer is feeling the pinch,” noted Jane Foley, senior FX strategist at Rabobank. “The BoE now faces a tough balancing act between supporting growth and keeping inflation in check.”
Indeed, despite recent easing in headline inflation, core inflation remains sticky, prompting policymakers to proceed cautiously. The BoE’s next meeting in August is now seen as a potential turning point, with traders reducing their bets on another rate hike and shifting focus to possible rate cuts in early 2026 if economic data continues to deteriorate.
In the bond market, UK gilt yields fell sharply following the release, with the 10-year yield dropping to 4.07%, signaling increased expectations of monetary easing. Meanwhile, the FTSE 100 index rose modestly, as investors bet that slowing growth could prompt the central bank to adopt a more supportive stance.
Looking ahead, the pound may continue to face downside risks unless upcoming data—particularly GDP and wage growth—shows signs of resilience. With global growth concerns and geopolitical uncertainties still looming, currency markets are expected to remain volatile.
For forex traders, the GBP/USD pair is now testing key support levels near 1.2600, with further downside likely if economic weakness persists. On the flip side, any hawkish signals from the BoE or positive surprises in future data could provide the pound with a much-needed lift.
