GBP flows: Little changed on strong retail sales
UK retial sales were strong in March, but were partly weather affected. GBP little affected as Q1 strength is expected to fade
UK retail sales once again come in much stronger than expected in March, rising 0.4% m/m, and 0.5% in the core, although the strength was slightly moderated by a downward revision to February. Even so, the quarterly gain of 1.6% is the strongest since the recovery from the pandemic in 2021.
But the numbers haven’t had any impact on GBP, in part because a lot of the strength in March was in clothing and footwear sales which were boosted by good weather, and the strength of Q1 GDP in the UK is already known, but feared to be temporary with the latest survey data showing a sharp dip. However, GBP and the EUR are both firm against the JPY and CHF this morning, both of which have softened as volatility has declined. GBP/JPY may still have scope for gains above 191, supported by the more positive risk tone, but if we do see a Q2 downturn the longer term risks are very much on the downside.
