Pound Drops the Seventh Day after U.K. Retail Sales Lag Expectations

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Pound Drops the Seventh Day after U.K. Retail Sales Lag ExpectationsThe sterling fell for the seventh straight day versus the dollar after retail sales grew less than expected in June, spurring bets that the Bank of England won’t rush to increase interest rates soon.

The pound plunged 0.4 percent to trade at $1.6981 at 5.00 p.m. in London, the longest weekly losing streak since January 2013. It had earlier touched $1.6967, its weakest level since June 25. Against the euro, the pound fell 0.4 percent to 79.32 pence.

“There is potential for the pound to move significantly lower,” Peter Kinsella, a London-based senior currency strategist at Commerzbank AG told Bloomberg. “The currency is trading too high relative to where swap spreads should be trading. The risk-reward isn’t great in going long cable at these levels.”

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The Office for National Statistics reported on Thursday that U.K. retail sales inclusive of fuel rose 0.1 percent in June. Market participants speculating the Bank of England may be the first major central bank to hike interest rates have boosted the pound 11 percent over the past 12 months, making it the best performing currency out of the 10 advanced-economy currencies tracked through Bloomberg Correlation-Weighted Indexes.

The yield of the 10-year gilt advanced 0.05 percentage point or 5 basis points to 2.61 percent. The 2.25 percent bond that matures on September 2023 fell 0.405 to 97.135. The target 10-year Treasury yields accelerated four basis points to 2.51 percent, while similar German yields appreciated 3 basis points to 1.18 percent.

The euro got a boost after Markit Economics reported that its euro area manufacturing and services Purchasing Managers Index increased to 54 in July, compared to June’s reading of 52.8. This matched April’s reading, which was the highest in three years. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com