- UK retail sales +12% mom in May vs 5.7% forecast
- Pound (GBP) gained but only a fraction of yesterday’s BoE selloff
- US Dollar remains supported from second wave covid-19 fears
- At 06:15 UTC, Pound US Dollar exchange rate (GBP/USD) +0.2% at US$1.2455
The Pound is stabilising on Friday after a steep sell off in the previous session. The Pound US Dollar exchange rate dived -1.1% settling US$1.2446, slightly above the 2-week low of US$1.2404 reached earlier in the session.
At 06:15 UTC, GBP/USD is trading +0.2% at US$1.2455, the pair is on track to lose 0.7% across this week, adding to 0.9% losses from the previous week.
The Pound is on the rise after retail sales smashed analysts’ expectations. Retail sales jumped 12% month on month in May, partly rebounding from -18.1% decline in April according to the Office of National Statistics.
Sales were lifted by a 42% rise at household goods stores as Britain focused on DIY in the lockdown period. Today’s retail sales will contain a large element of pent up demand. However, the outlook for spending remains bleak according to economists.
Despite the strong retail sales data, the Pound only rebounded marginally from Thursday’s losses. The Pound dived across the previous session after the Bank of England monetary policy announcement. As expected, the BoE kept interest rates at 0.1%. Also as expected, the central bank increased its asset purchase programme by £100 billion. However, there was one dissenting vote, from Andy Haldane the Chief Economist at the BoE., which unnerved investors.
Furthermore, the central bank slowed the rate at which it is purchasing bonds as it saw signs of recovery n the UK economy. This slightly more hawkish stance rocked Pound investors sending the Pound plummeting.
The US Dollar is heading for its best week in a month as a resurgence in coronavirus cases has knocked confidence in a quick economic recovery and drove investors towards the safe haven currency.
Souring relations between the US and China also boosted safe haven flows toward the greenback, after Trump threatened once again to cut ties with China after the first round of high-level talks between the two powers in month.
