U.K. Retail Sales Unexpectedly Advances

Fundamental Headlines

• Bernanke Prepared to Take New Steps – Wall Street Journal
• Euro-Zone Private Sector Expands – Wall Street Journal
• Fed Ready to Act Amid Uncertain Outlook - Financial Times
• Euro Passes Stress Test With Debt Panic Ebbing as Bank Exam Results Loom - Bloomberg
• Bernanke Says Fed Is Prepared to Act as Needed - Bloomberg


GBP/USD: Retail sales in the U.K. advanced 0.7 percent  in June after climbing a revised 0.8 percent the previous month to exceed economists’ expectations of 0.5 percent. At the same time, annualized sales jumped 1.3 percent, the office for National Statistics in London said today. Despite the better than expected release in today’s figures, we may see retail sales come under pressure during the ending months of this year as lingering concerns regarding the debt crisis in Europe continues to weigh on consumer confidence in the U.K.  Indeed, theadvance in sales trails the Bank of England minutes in which Sentence voted against the majority and argued that inflation “had shifted sufficiently to justify beginning to raise interest rates gradually.” Meanwhile, policy makers stated that while it was “too early” to fully assess the implications of the budget for inflation, the planned value – added tax increases would probably add to consumer price growth in 2011. Thus, the VAT increase from 17.5 percent to 20.0 percent will likely add upward pressure onto inflation and dampen retail sales next year. Nonetheless, the Bank of England may maintain its wait and see approach as the global economy continues to face major headwinds in its recovery. To discuss this and other topics, please visit the GBP/USD forum.
 
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Written by Michael Wright, Currency Analyst
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