- Lloyds Bank
Investors still bet on a rally on the Cable by the end of this week, as Friday's GDP report is likely to add more pressure on the Bank of England to start raising rates sooner-than-excepted.
Nevertheless, so far this week news from the U.K. has been rather disappointing. Following weaker-than-expected public sector net borrowing, retail sales– the leading indicator of economic health, fell short of analysts' expectations. On Thursday the ONS said sales volumes including auto fuel climbed just 0.1% from May. Experts were betting on a 0.3% gain. Core retail sales fell to –0.1%, also against prediction of a 0.3% increase. The main downside pressure came from clothing sales which slipped 2%, as prices increased the most for any June on record. Despite weaker-than-expected monthly and yearly readings, quarterly growth remain solid, expanding 1.6% from 0.5% three months earlier, posting the strongest growth in the last ten years. Quarterly data is unlikely to be significantly revised down in the next two months, hence, a solid boost to GDP can be expected. Retail sector accounts for around 5.7% of total economic output.
Soon after the release of the data the Pound turned lower 0.16% to 1.7012 versus the Greenback. While market sentiment is strongly bearish (66%), vast majority of pending orders in a 50 and 100-pip range are placed to buy the Sterling versus the Buck.
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