Sterling Pushed Higher by Positive Retail Sales
THE TAKEAWAY: UK retail sales (ex auto fuel) up 0.9% in May -> UK economy feels pressure of Eurozone crisis -> Sterling bounces following earlier session correction
UK retail sales (excluding auto fuel) were higher than expected in May, rising 0.9% following April’s 1% decline, and 0.2% better than expected. Retail sales were also 3.0% better than May 2011. The total sales form April 29 to May 26 was 26.4 billion pounds.
Textile, clothing and footwear saw a 3.4% increase in sales during May, and auto fuel sales were up 6.2%. Food store sales were only up 0.2%.
Today’s positive retail sales release comes only 1 day after gloomy Bank of England minutes spoke of the negative effects of the European crisis on the UK economy. Four out of nine BoE members voted for additional stimulus in June and Governor Mervyn King said last week that the case for stimulus is growing for July’s meeting.
Cable saw a pop above 1.5750 during yesterday’s trading, as the FOMC agreed to continue Operation Twist and keep interest rates low. Earlier today, Sterling erased yesterday’s gains against the dollar, and the positive retail sales only pushed cable back up towards 1.5700.
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