TD Securities’ Global Strategy Team expects UK retail sales growth to slow to 0.1% month-on-month in January. That would be below the market forecast of 0.2% and down from 0.4% previously. The team still expects consumer spending to hold up, but it sees a softer underlying trend.
It says December’s retail figures were boosted by jewellery purchases. It does not expect that strength to continue in January.
Uk Data Momentum Moderation
The team also expects UK Purchasing Managers’ Index (PMI) readings to ease in both manufacturing and services. Even so, it forecasts PMIs of 51.5 for manufacturing and 53.5 for services, in line with market expectations.
It links the earlier lift in sentiment and new orders to lower uncertainty after the budget. It expects that boost to fade about three months after the event.
For 2026, the team expects growth to come in bursts, but overall activity to remain cautious.
There are also signs the UK consumer is turning more cautious, which fits with slower expected retail sales growth. This lines up with recent Office for National Statistics data showing January inflation stayed unexpectedly firm at 2.8%. That makes Bank of England rate cuts harder to justify. If inflation remains sticky, households’ spending power is likely to stay under pressure in the near term.
Derivative And Fx Strategy Implications
A softer PMI print, even if it stays above 50, supports the idea that momentum is cooling. The jump in business confidence seen in late 2025 after clarity around the autumn budget now looks like it is settling back to normal. That suggests markets may have priced in a stronger recovery than what is actually happening.
For derivatives traders, this setup favors selling volatility, since a sharp upside growth surprise looks less likely. FTSE 100 implied volatility is still a bit higher than its 2023–2024 averages. Strategies such as selling covered calls on UK equities or selling short strangles on the index may look attractive. These trades tend to do well when markets move slowly or trade in a range, rather than breaking out strongly.
In FX, this cautious UK outlook may limit how far the pound can rise. If the Bank of England stays on hold, range-based option strategies in GBP/USD, such as iron condors, could work well in the weeks ahead. Any sterling rallies may be better treated as chances to sell into strength, rather than the start of a lasting uptrend.
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