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Pound rises as UK retail sales beat forecast

Daily Currency Update

GBP/USD has risen this morning as the latest UK retail sales data beat the forecast showing 0.5% growth for April. Despite inflation being close to a 40-year high it seems consumers are continuing to spend online and on the high street which is helping the UK economy perform far better than many would have envisaged six months ago. That said it seems we could see spending reigned in as we head into the second half of the year as the Bank of England will likely be forced to raise interest rates beyond five percent in an effort to quell persistent price rises. GBP/USD has pushed back up to the 1.2350 level as a result of the spending data however any major moves higher will be held back until US policymakers can find an agreement regarding raising the debt ceiling which is the market’s primary concern at present. GBP/USD currently sits at 1.2360 with GBP/EUR remaining just above 1.15.

Key Movers

The impasse re: the US debt ceiling seems to be crawling towards a conclusion with improving mood music on the matter emanating from Washington. The US Treasury Department has a legal restriction on what it can borrow, and Democrats and Republicans seem to be edging closer to negotiating the terms that will allow it to be raised from its current $31.4 trillion. It is likely towards the end of next week we should have an agreement to raise the limit however the longer it drags on the more jittery markets will be leading to stock market losses and safe haven assets such as gold and the US dollar sought. Data-wise we saw US economic growth revised higher for the first quarter yesterday with an annualized 1.3% expansion seen versus an initial estimate of 1.1%. This afternoon we have Personal Consumer Expenditure data from the States with a monthly rise of 0.3% eyed. It’s a quiet day from the Eurozone with no notable data on the agenda. The euro remains under pressure on the back of Germany slipping into recession and markets seeking the safety of the US dollar with EUR/USD trading just above 1.07.

Expected Ranges

  • GBP/USD: 1.2305 - 1.2500 ▲
  • GBP/EUR: 1.1470 - 1.1560 ▼
  • GBP/AUD: 1.8835 - 1.9000 ▲
  • EUR/USD: 1.0695 - 1.0800 ▼