Retail sales in the UK surprised forecasts, jumping 0.6% on the month in May, compared to a forecast of 0.1%. The increase was fueled by higher sales at electronics stores - a byproduct of consumers wanting to watch the World Cup games on wide-screen TV's. If the UK soccer team goes far in the tournament, the sales figures in June may get a boost as well. The higher spending flew in the face of a sharp decline in consumer confidence reported by Nationwide this week. Still, with sharp government spending cuts coming around the corner, it will be important to monitor for any pullback in spending.
The Pound slid in late NY trading yesterday on the back of BOE Governor King's comments that the UK is not showing signs that the recent high inflation readings will persist. Inflation slowed to a 3.4% annual rate in May from 3.7% in April, which had been a 17-month high. King sees spare capacity in the economy rather than excess supply, and if prospects for growth decline then the outlook for inflation would probably be lower.
The Pound regained yesterday losses in today's trading on the back of risk appetite in the financial markets. The GBP/USD rally stalled at the 1.4850 level prior to the beginning of the US session.
In a second report from the UK, a measure of factory orders - the CBI industrial orders expectations - fell in June, a weak sign for the UK manufacturing sector. The index slipped to -23 from -18 in May. The decline was driven by Sharp deterioration in orders for capital goods manufacturers, a sign that companies are investing in less capital equipment. The news follows a very weak industrial production report from the UK for April, in which output fell by 0.4% when forecasts were for a 0.5% rise. On the other hand, a weaker Pound could help boost UK exports.