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Pound sterling reaches a new 37-year low as retail sales dip across UK

Pound sterling reaches a new 37-year low as retail sales dip across UK

The pound sterling has reportedly hit a new 37-year-low with August retail sales witnessing a steeper decline than previously forecasted by industry experts. One of the major reasons behind this was the growing cost-of-living crisis, which has negatively impacted the demand for essential and non-essential goods, further devaluing the British currency.

Newly released figures by the UK’s Office for National Statistics (ONS) showed that the region’s retail sales volumes charted a trajectory from shaky growth trajectory in the previous month to a 1.6% decline on July, registering the biggest monthly drop since December last year.

According to credible sources, economists had predicted a dip of around 0.5% as a four-decade-high inflation stifles consumers spending capacity. With conditions created by the COVID-19 pandemic and the ongoing Russia-Ukraine war surging commodity and energy costs, prices of food and other goods as well as services have also gone up.

The ONS has also stated that all of the nation’s main sectors, such as food and non-food stores, fuel and non-store retailing observed a major slump over the month. The overall sales value also decreased during this period.

Retailers are hoping that the energy price guarantee, which proposes to limit bills with the help of a cap on the wholesale prices starting October, would ease some pressure being put on purse in the lead up to Christmas season.

The UK government’s energy price guarantee, which is set at £2,500, intends to keep the electricity and gas bills at the current annual level of around £2,000 owing to the £400 financial aid announced by former chancellor, Rishi Sunak, for UK households in addition to a short-term cut to the green taxes charged in electricity bills.

Commenting on the pound’s latest dip, Walid Koudmani, Chief Market Analyst, XTB, stated that the delicate situation of the UK’s economy, further highlighted by a plunge in the retail sales, was a contributing factor to the decline in the pound’s value along with the dollar’s growing strength.

Koudmani stated that the Bank of England must take steps to create a strong balance between providing the right support to its falling currency without hampering the economic progress and successfully managing the inflation scenario.

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