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UK retail sales decline

Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Daniel Richards - MENA Economist
Published Date: 19 September 2022


  • UK retail sales contracted more sharply than anticipated in August in data released on Friday. Both headline sales and ex-auto fuel sales contracted by -1.6% m/m, compared to expectations of -0.5% and -0.7% respectively. Compared to last year, sales ex-auto fuel were down -5.0%. The contraction was broad based with declines across all segments for the first time since July 2021 when the reopening of hospitality venues saw a redirection of spending from goods to services. There were marked falls in sales of big-ticket items such as furniture, with respondents to the ONS saying that households are increasingly pushing major discretionary purchases back as they contend with the inflation-driven wage squeeze. The weak data helped push the pound to a new 37-year low against the dollar.
  • Eurozone inflation was confirmed at 0.6% m/m and 9.1% y/y in August, with core inflation accelerating to 4.3% y/y from 4.0% in July. Price pressures in the eurozone are becoming much more broad-based, putting pressure on the ECB to accelerate the pace of rate hikes even as the economy weakens.   
  • The University of Michigan consumer sentiment index came in slightly below forecasts in the preliminary reading for September at 59.5. However, this was still an improvement on the August reading of 58.2. The main improvement was in the expectation component of the survey and long-term inflation expectations also declined to 2.8% from 2.9% in the August survey. 
  • The week ahead will be a busy one, notwithstanding the bank holiday in the UK today. The focus will be squarely on the US Federal Reserve which is expected to hike its policy rate by 75bp on Wednesday. The Bank of England is expected to follow with a 50bp rate hike on Thursday and PM Liz Truss will announce a series of new measures this week to tackle the cost of living crisis in the UK, culminating in a mini-budget on Friday where the Chancellor is expected to reverse the increase in national insurance, cancel the planned rise in corporate tax and remove green levies on energy bills.
  • Egypt’s Suez Canal Authority is set to raise its transit fees from the start of 2023. Liquid bulk carriers will pay 15% more while dry bulk vessels and cruise ships will pay 10% more. Inflationary pressures were cited as the reason for the hike. The Suez Canal is an important source of FX inflows for Egypt.

No key economic data and events

Fixed Income

  • The hotter than expected August CPI print and this week’s upcoming FOMC meeting helped to sink US Treasuries last week as the Federal Reserve appears compelled to maintain an aggressively hawkish stance. A broad index of US Treasuries fell by 0.8% last week, falling for seven weeks in a row. The 2yr UST yield ended the week with relatively little change though over the course of the five days it rose by 31bps to close out at 3.8671%. The 10yr was a little more constrained though yields still added almost 14bps over the week to settle at 3.4494%.
  • European markets also had a heavy week as the prospect of much more tightening from the ECB and a still dire inflation picture weigh on bonds. The 2yr Schatz yield added 21bps last week to settle at 1.516%, its second week in a row of a greater than 20bps rise. Bund yields also rose, up by 6bps last week to 1.754%. Gilt yields continued to rise, adding 4bps to 3.134% on the 10yr ahead of this week’s BoE meeting where a large hike is priced into markets.
  • Emerging market bonds had a poor trading week, with a broad index of USD-denominated bonds down more than 1%. South Africa’s 10yr yield ended the week at 10.763%, India’s at 7.23% while the local currency Turkish bond yields closed at 11.15%.
  • The FOMC will be the highlight of the week as far as central bank action is concerned with a 75bps hike appearing as a given though there is an outside chance of 100bps. Elsewhere the Riksbank in Sweden is expected to hike rates on September 20 while September 22 nd is a heavy week for central bank action with the Bank of England, Bank of Japan, Swiss National Bank, Bank Indonesia, Turkey’s central bank, the Central Bank of Egypt, the South African Reserve Bank, Taiwan’s central bank and Norway all setting policy.
  • S&P Global Ratings has affirmed Saudi Arabia’s A- rating with a positive outlook, citing higher oil prices and production which are expected to result in a budget surplus of 6.3% of GDP as well as “robust” growth of 7.5% this year.


  • Currency markets endured a few choppy days last week but not enough to outweigh the heavy selling against the dollar in the wake of the August US CPI print. The broad dollar index added 0.7% last week with much of the gains coming at the expense of GBPUSD which dropped by 1.46% to 1.142. EURUSD was also offered with the single currency down by 0.26% to 1.0016, managing to tentatively hold above parity. USDJPY added 0.3% to 142.92.
  • Commodity currencies sagged against the dollar with USDCAD moving up by 1.8% to 1.3264 while AUDUSD fell by a similar amount to 0.6716 at the end of the week and NZDUSD fell nearly 2% to 0.5989.


  • Equity markets ended the week in the red last week, not least in Asia. In China, the Shanghai Composite ended down -3.4% w/w on Friday even as government support for the economy was stepped up, with concerns over slowing growth amid the ongoing zero-Covid strategy outweighing it in the balance of risks. Japan’s Nikkei lost -2.3% w/w.
  • European equity markets tumbled further on Friday as recession concerns heightened and UK retail sales data disappointed, leading to w/w losses by the close. The FTSE 100, the CAC and the DAX dropped -1.6% w/w, -2.2% and -2.7% respectively.
  • In the US, stocks saw their biggest weekly losses since mid-June as they suffered further risk-off sentiment on Friday. The Dow Jones, the S&P 500 and the NASDAQ ended the week down -4.1% w/w, -4.8% and 5.5%.
  • Local markets managed to buck the global trend last week, much as they have done over the year to date. The DFM ended up 3.8% w/w at Friday’s close, while the ADX added 4.1%.


  • Oil prices fell a third week in a row with Brent futures closing at USD 91.35/b, down 1.6%, while WTI fell by 1.9% to USD 85.11/b. Anxiety over economic growth is the main catalyst for oil markets at the moment and so long as there is a hawkish tone to central banks and China maintains its restrictive covid policies, oil could be expose to more downside.
  • Gold prices ended last week at USD 1,675/troy oz, down 2.4% over the five days. While a large hike from the Fed is expected this week, the revised economic projections from the Fed could open up more doom for gold prices. A particularly hawkish dot plot could help push gold prices even further.

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