GBP is firmer after UK January retail sales growth overshot expectations , BBH's FX analysts report.

Near-term stagflation backdrop which is an ongoing drag on GBP

"Retail sales volumes increased by 1.7% m/m (consensus: 0.5%) following a decline of -0.6% in December (revised from -0.3%). Excluding automotive fuel, retail sales volumes surged 2.1 % m/m (consensus: 0.9%) vs. -0.9% in December (revised from -0.6%)."

"The details were less impressive and suggests underlying consumer spending activity remains subdued. Food stores sales volumes accounted for the bulk of the pick-up in retail sales. Over the month, food stores sales volumes rose by 5.6%, the largest rise since March 2020, while non-food stores fell -1.3%."

"Markets still imply a total of 50bps of BOE policy rate cuts over the next 12 months. But the BOE’s job is complicated by the UK’s near-term stagflation backdrop which is an ongoing drag on GBP."