Pound Declines Amid Weak U.K. Retail Sales Data, Political Crisis

(RTTNews) - The pound dropped against its major counterparts in the European session on Friday, as the nation's retail sales fell more than expected in September and the resignation of Prime Minister Liz Truss triggered political instability.

Data from the Office for National Statistics showed that retail sales dropped 1.4 percent month-on-month, following a revised 1.7 percent decline in August. Economists had forecast sales to drop at a slower pace of 0.5 percent.

Excluding auto fuel, retail sales fell 1.5 percent after easing 1.7 percent in the previous month. Sales were forecast to ease 0.3 percent.

On a yearly basis, the decline in retail sales worsened to 6.9 percent in September from 5.6 percent in August. Economists had expected sales to fall 5.0 percent.

Excluding auto fuel, retail sales decreased 6.2 percent versus a 5.3 percent decline in the previous month. Sales were forecast to drop only 4.1 percent.

Truss resigned overnight following a rebellion in her political party, as an economic program fuelled concerns about financial stability.

The ruling Conservative Party is expected to select a successor by the end of next week.

The GBP/USD pair touched an 8-day low of 1.1147. The pound may locate support around the 1.10 level.

The GBP/JPY pair fell to 168.04, from a high of 168.75 seen at 3:25 am ET. If the pound falls further, it is likely to test support around the 160.00 region.

The pound reversed from its early highs of 1.1277 against the franc and 0.8702 against the euro, dropping to a 3-day low of 1.1220 and an 8-day low of 0.8766, respectively. Next key support for the currency is possibly seen around 1.08 against the franc and 0.89 against the euro.

Looking ahead, Canada retail sales for August, as well as new housing price index and wholesale sales and U.S. monthly budget statement, all for September, will be featured in the New York session.

At 10:00 am ET, Eurozone flash consumer sentiment index for October will be out.