The British pound was trading close to seven-week lows against the dollar on Wednesday as data showing that U.K. retail sales slumped in April increased the likelihood of more easing by the Bank of England.
GBP/USD hit 1.5075 during European afternoon trade, the pair’s lowest since April 4; the pair subsequently consolidated at 1.5091, shedding 0.39%.
The U.K. retail sales fell 1.3% in April from March, the largest fall in a year and confounding expectations for a flat reading.
Retail sales rose 0.5% from a year earlier, well below expectations for a 2.0% increase.
FX-MM wrote that the Bank of England is up shortly with the latest minutes – hard to imagine anything spectacular as we are in a kind of “lame duck” period for the BoE, which won’t want to make any major splash now that economic data has picked up slightly and with a new remit and new leader on the way in the next couple of months.
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The weak inflation data yesterday was seen as a green light for Carney to indulge in more monetary experimentation and EURGBP rallied through key resistance around 0.8500. This could be the start of something for the pair towards 0.8600 or even higher.
The International Monetary Fund urged Britain’s government to do more to stimulate growth in its annual review of U.K. economic policies on Wednesday, and warned that austerity measures are posing headwinds to growth.