UK retail sales rose due to warm weather and higher food costs, but momentum slowed.
by VT Markets
/
Aug 12, 2025
## UK Economy Outlook
UK retail sales are growing, but this poses a challenge. Although spending appears strong, it is mainly due to higher prices and is starting to slow down compared to last month. We are closely monitoring whether consumers can keep up this spending as the job market weakens.
This situation makes it difficult for the Bank of England as they prepare for their next decision, expected in late September. Data from July 2025 shows inflation holding steady at 2.8%, making them cautious about signaling any rate cuts. At the same time, the rising unemployment rate, now at 4.5% in the second quarter of 2025, may push them to relax policies soon.
## Focus on Derivative Markets
For derivative traders, the next few weeks should focus on interest rate markets. Activity in SONIA futures is increasing, with the market indicating a 50% chance of a rate cut by the end of the year. This data could change those odds, creating opportunities for those who anticipate a delay in the first cut.
In the currency markets, the Pound’s position at 1.3434 looks unstable. This reflects a significant rebound from the 1.25 range most of 2024, likely influenced by expectations around interest rates. We believe implied volatility on GBP options is too low, suggesting it’s a good time to explore strategies that could benefit from sharp price movements in either direction.
We’re also interested in equity derivatives, especially within the FTSE 250. Strong clothing and food sales data supports a positive outlook for certain consumer stocks in the short term. One strategy could be to use options to invest in retail stocks while also protecting against overall market declines due to the weaker economic outlook.
Create your live VT Markets account and start trading now.
by VT Markets
Aug 12, 2025
Insights 
VT 
