Forex News: Pound Falls On Weak U.K. Retail Sales Data

Pound Falls On Weak U.K. Retail Sales Data

(RTTNews) - The British pound weakened against other major currencies in the early European session on Friday, after U.K. retail sales declined more than expected in May on weak food store sales.

Data from the Office for National Statistics showed that U.K. retail sales fell 2.7 percent on a monthly basis in May, in contrast to the revised 1.3 percent increase in April. Sales were forecast to drop 0.5 percent.

Following a strong growth of 4.7 percent in April due to good weather, sales posted a monthly fall of 5 percent. Non-food store sales were down 1.4 percent.

Excluding auto fuel, retail sales slid 2.8 percent month-on-month, reversing a 1.4 percent rise in April and was also sharper than the expected drop of 0.5 percent.

On a yearly basis, retail sales decreased 1.3 percent, following a 5.0 percent rise in April. Sales volume, excluding auto fuel, also declined 1.3 percent in May, after rising 5.2 percent a month ago.

In other economic news, UK public sector net borrowing increased in May despite an increase in government receipts, official data showed.

In May, borrowing increased GBP 0.7 billion from the last year to GBP 17.7 billion, the Office for National Statistics reported. This was more than the GBP 17.1 billion forecast by the Office for Budget Responsibility.

Further, this was the second highest borrowing in any May since records began in 1993.

Geopolitical concerns remain in play, with Israeli Prime Minister Benjamin Netanyahu ordering intensified strikes on Iran, targeting 'strategic' and 'government' sites in Tehran, following a reported Iranian missile strike on a hospital in Beersheba.

An Iranian missile struck a premier research institute in Israel known for its work in life sciences and physics, among other fields.

Thursday, the Bank of England (BoE) held interest rates steady in the monetary policy announcement.

Weak U.K. retail Sales data is likely to encourage the traders to raise their bets for more reductions in the interest rate by the Bank of England. Following Thursday's monetary policy announcement, in which the central bank maintained its benchmark borrowing rates at 4.25%, as the consensus indicated with a 6-3 vote majority, traders anticipate that the BoE will lower them twice in the rest of the year.

BoE Governor Andrew Bailey said that interest rates are still on a "gradual downward path" and maintained the "gradual and careful" monetary easing approach. As tensions in the Middle East escalate, he cautioned that the economy is at serious risk from deteriorating labor market conditions and rising energy prices.

The British sterling traded higher against its major rivals in the Asian trading today.

In the early European trading today, the pound fell to 0.8552 against the euro, from an early high of 0.8538. The next possible downside target for the pound is seen around the 0.86 region.

Against the U.S. dollar, the yen and the Swiss franc, the pound dropped to 1.3463, 195.70 and 1.0983 from early 3-day highs of 1.3501, 196.33 and 1.1025, respectively. If the pound extends its downtrend, it is likely to find support around 1.32 against the greenback, 193.00 against the yen and 1.08 against the franc.

Looking ahead, Canada new housing price index for May, retail sales data for April, PPI for May, raw material prices data for May, U.S. Philadelphia Fed manufacturing index for June, U.S. Consumer Board's leading index for May, U.S. Baker Hughes oil rig count data and Eurozone flash consumer confidence for June are slated for release in the New York session.

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