The British pound extended its losses today following weak retail sales numbers.
Consumer spending dropped for the first time in six months during the month of October because of weaker food and clothing sales. Overall, the report highlights the Bank of England’s concerns that downside risks for growth loom large, especially after the central bank aggressively raised interest rates this year and as oil continues to trade near record highs. Furthermore, with the Bank of England’s inflation report suggesting that price pressures would rise in coming months, signs of an economic slowdown will only help build the case for a rate cut in Q1 2008. The Bank of England is notorious for shifting their monetary policy bias on a dime should data warrant it. Therefore a first quarter rate cut is becoming a realistic possibility.