Sterling held just above recent lows, with GBP\/USD consolidating after touching 1.3336, as UK August retail sales beat forecasts and unwound July\u2019s decline. Total retail sales volumes rose 0.5% month on month versus a consensus call of -0.2%, following a -0.5% print in July; excluding automotive fuel, sales increased 0.6% compared with expectations of -0.2%, after -0.9% previously. The release pushed market pricing for a 25 basis-point Bank of England move in November up to as much as 90% from 83%, reflecting firmer near-term tightening expectations.<\/p>\n
Rate expectations further out remain elevated, with the swaps curve implying about 100 basis points of increases over the next 12 months to 4.75%. Bank Rate at 3.75% sits near the top of the BoE\u2019s estimated 2% to 4% neutral range, while the broader economy is described as operating below capacity and fiscal policy is expected to become more restrictive. Against that backdrop, sterling\u2019s support from stronger data may be tested if interest-rate pricing shifts in a more dovish direction.<\/p>\n\n\n\n