The Pound Sterling (GBP) held steady against the Euro (EUR) and U.S. Dollar (USD) after fresh UK data pointed to firmer growth momentum at the start of the year.
Pound to Euro (GBP/EUR): 1.1441 (+0.03%)
Pound to Dollar (GBP/USD): 1.3447 (-0.1%)
Euro to Dollar (EUR/USD): 1.17533 (-0.13%)
January retail sales delivered a clear upside surprise. Volumes rose 1.8% month-on-month, far above expectations, with core sales excluding petrol up 2.0%.
Pantheon Macroeconomics says the figures provide “further evidence that economic growth picked up smartly in the New Year” as Budget-related uncertainty faded.
Sales volumes have climbed 2.2% over the past two months, reversing the autumn dip.
While some of January’s strength was flattered by jewellery and auction-related spending, there were broader gains too.
Food sales posted their strongest monthly rise since last summer, clothing volumes edged higher despite poor weather and household goods rebounded after a weak December.
Pantheon economists caution that UK retail figures are volatile and often partially reverse the following month.
Even so, consumer confidence measures tied to major purchases have improved, suggesting spending momentum is not purely noise.
Retail alone could add modestly to Q1 GDP even if February softens.
Alongside the retail data, public finances offered unexpected relief. January’s public sector surplus came in at £30.4bn, exceeding forecasts and leaving borrowing for the fiscal year to date running £8.3bn below the November Budget profile.
Pantheon describes the figures as “good news for the Chancellor”, though warns spending pressures remain.
Much of the upside surprise stemmed from lower-than-expected interest costs, while underlying current spending ran slightly hotter than projected.
Lloyds economists, in a brief to clients today, note the significance for gilt markets.
The cash requirement is now nearly £22bn lower than expected so far this fiscal year.
If sustained, that could reduce next year’s gilt issuance, a market-friendly outcome for supply expectations ahead of the Spring Statement on 3 March.
Taken together, the data suggest firmer growth momentum entering 2026 and some short-term fiscal breathing space.
For Pound Sterling, the UK retail surprise supports the domestic growth narrative, though the currency remains sensitive to broader rate expectations and global dollar moves.
See full ONS data releases: Retail sales, Great Britain: January 2026 and Public sector finances, UK: January 2026
