GBP flows: GBP little changed after retail sales

UK retail sales have come in stronger than expected in May, rising 2.9% and more than fully reversing the revised decline of 1.8% in April. GBP briefly rose on the news but is now little changed. In reality, the recovery in May is of little significance, with the April/May average still below the level seen in March. The underlying trend has certainly improved in recent months, but latest three months are still broadly flat compared to a year ago. The data is unlikely to affect BoE thinking, which yesterday’s MPC suggested is leaning towards an August rate cut. EUR/GBP remains more driven by EUR sentiment, which itself is more about French politics than economics at this stage. However, the PMIs this morning will be significant. If we see only a modest correction from the strength seen in May, the EUR may manage a modest recovery, but EUR/GBP will be looking at the UK/Eurozone differential.