The pound depreciated against its major counterparts in the European session on Friday, as the nation's retail sales declined more than expected in December and concerns about an imminent interest rate hike by the Federal Reserve dragged down European stocks.

Data from the Office for National Statistics showed that retail sales fell 3.7 percent on a monthly basis in December, reversing the 1 percent increase a month ago. Sales were forecast to fall 0.6 percent. This was the biggest decline since January 2021.

Likewise, sales volume excluding auto fuel, decreased 3.6 percent after rising 0.7 percent in November. The decline was much bigger than the economists' forecast of -0.5 percent.

Non-food store sales declined sharply by 7.1 percent in December and food-store sales were down 1.0 percent from the previous year.

Year-on-year, retail sales decreased 0.9 percent, in contrast to the 4.3 percent increase seen in November and the economists' expectations +3.4 percent.

Excluding auto fuel, retail sales were down 3 percent, reversing the 2.2 percent increase in the prior month. Economists had forecast annual fall of 1.1 percent.

Investors continued to worry about the prospects for a faster policy tightening by the Fed to tackle inflation.

The Fed meeting is due next week, which is expected to offer more clues on the rate hike cycle starting in March.

The pound dropped to a 3-day low of 0.8362 against the euro, from Thursday's closing value of 0.8317. The next likely support for the pound is seen around the 0.86 level.

The GBP/JPY pair touched 154.22, its weakest level since December 29. At Thursday's close, the pair was valued at 155.09. On the downside, 150.00 is possibly seen as its next support level.

The GBP/CHF pair fell to more than a 2-week low of 1.2368 from yesterday's close of 1.2467. The pound is seen finding support around the 1.22 region.

The pound declined to 1.3552 against the greenback, marking an 11-day low. The pair had finished Thursday's deals at 1.3598. If the pound slides further, it may find support around the 1.32 level.

Looking ahead, Canada retail sales for November and new housing price index for December will be featured in the New York session.

Eurozone flash consumer sentiment index for January and U.S. leading index for December will be out at 10:00 am ET.

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