GBP flows: GBP softer after weaker than expected rise in retail sales
EUR/GBP at 3 month highs as retail sales rise less than expected in June
UK retail sales rose a little less than expected in June, after a sharp decline in May. The underlying trend appears to have weakened in recent months, but on a longer term basis it still looks fairly stable, with the y/y growth rate having improved slightly in the last year and now close to flat. However, the data was weak enough to propel EUR/GBP to 3 month highs, approaching the highs of the year at 0.8738 seen in April. We doubt that this high will be broken on the basis of today’s data, but the underlying trend does look to be higher for EUR/GBP, with yield spreads gradually contracting as the BoE looks likely to become more dovish while the ECB comments yesterday suggest a period of stability.
