Sterling fell in European trade on Friday on track for the third straight loss against the dollar away from a two-month high on active profit-taking.

Grim UK retail sales data in October indicated the likely recession of the UK economy in the final quarter of the year, and paved the way for an early interest rate cut by Bank of England next year. 

GBP/USD

GBP/USD fell 0.3% to 1.2380, with a session-high at 1.2422, after closing down 0.1% on Thursday, the second loss in a row on profit-taking off two-month highs at 1.2505. 

Grim Data

UK data showed retail sales fell 0.3% in October, while analysts expected a rise of 0.5%. 

Retail sales merchants said in the report that higher living costs and the wet weather in October contributed to the decline.

Such data clearly indicates the rapid recession of the UK economy in the fourth quartet of the year, and will likely force Bank of England to cut interest rates earlier than expected in 2024. 

Goldman Sachs expects Bank of England to cut interest rates by 25 basis points in February 2024. 

Earlier UK consumer prices data this week also showed prices have slowed down to two-year lows.

Such data reduces the pressure of inflationary pressures on BoE and confirms the end of the current cycle of policy tightening. 

Copper prices edged down on Thursday off six-week highs as the dollar strengthened following data that showed the Fed will wait longer than expected before cutting interest rates.

Three-month copper futures at the London Metals Exchange fell 0.4% to $8236 a tonne. 

Copper December futures rose 0.1% to 67,760 yuan a tonne at the Shanghai Exchange. 

Dollar was somewhat boosted after strong US retail sales data, which bolstered the narrative of a "soft landing" for the US economy, in turn allowing the Fed to take sometime before cutting interest rates. 

Dollar's strength against major rivals makes commodities costlier to holders of other currencies. 

Copper scaled six-week high on Wednesday following strong Chinese industrial production data, however gains were limited by the weakness in the Chinese real estate sector. 

Aluminum prices fell 0.3% at the London Metals Exchange to $2227 a tonne, while nickel fell 0.2% to $17,385, as zinc fell 1.3% to $2622, while lead fell 0.7% to $2229. 

Otherwise, the dollar index stabilized positively at 104.4 as of 17:01 GMT, with a session-high at 104.5, and a low at 104.01.

Copper December futures fell 0.8% as of 16:58 GMT to $3.68 a pound. 

Global oil prices fell on Thursday on track for the third straight session as US crude stocks climb in a negative sign of demand in the world's largest fuel consumer.

Prices are also hurt by renewed concerns about Chinese demand as Chinese refinery output declines in October.

Global Prices

US crude fell 1.1% to $75.72 a barrel, while Brent shed 0.75% to $80.32 a barrel, after losing 2.1% on Wednesday, as Brent lost 1.7%.

US Stocks 

The Energy Information Administration reported a spike of 17.5 million barrels in US crude stocks in the last two weeks.

Total stocks are now up up to 439.4 million barrels.

US Production 

The EIA reported no change in US crude production last week, remaining at 13.2 million  barrels, the highest in US history.

Chinese Demand 

Chinese refinery output declined once again in October according to latest official data, as demand on fuel declines. 

Chinese housing prices also fell for the fourth straight month in October, while real estate sales tumbled by 20.33% y/y. 

Analysis 

Analysts notice that technical factors limit upward movements in oil prices, in addition to clear global pressures due to changes in the demand-supply dynamics worldwide. 

Dollar rose in European trade on Thursday against a basket of major rivals, extending recovery for the second session off two-month lows. 

The recovery comes ahead of important US economic data on unemployment claims and factory output in October. 

The Index

The dollar index rose 0.2% to 104.55, with a session-low at 104.30, after rising 0.3% on Wednesday, the first profit in four days away from a two-month trough at 103.98. 

Dollar was buoyed by a rebound in US treasury yields after strong US retail sales data.

Gains remain limited as traders await important US data today, which will provide clues on the likely path ahead for policies next month.

The odds for a 0.25% US interest rate hike in December stand at just 2.5%. 

US unemployment claims are expected up to 221 thousand in the week ending November 11, from 217 thousand last week. 

US industrial output is expected down 0.4% in October.