British Pound Sterling | Currency News Views and Outlook
British pound sterling: Currency on the advance as we finally get some good economic news (thanks to the weather!)
- Category: British Pound Sterling
- Published on Thursday, 21 June 2012 09:55
- Written by Will Peters
"The trend in retail sales should therefore be upwards from here, helping to contribute to better news for growth as the year progresses" - Alan Clarke at Scotia Bank.
Support for the pound sterling (Currency:GBP) has come on a number of fronts. Firstly, nervous investors have bid up sterling in favour of riskier currencies such as EUR and AUD, secondly, some good economic news has come out.
A brief look at the spots shows, the pound euro exchange rate is 0.23 pct higher on Wednesday's close at 1.2401. The pound dollar exchange rate is pretty much unchanged on yesterday's close at 1.5719. The pound Australian dollar fx rate is 0.2 pct higher at 1.5455.
(PS. Our latest pound euro forecasts are live at our IMT site, access is Free via this Facebook gateway).
On the economic front the British pound found support when it was shown that UK shoppers turned out in force in May.
Good weather helped demand for items such as clothes and shoes.
Retail sales volumes bounced back 1.4%, although that was not enough to reverse April's 2.4% fall.
Alan Clarke at Scotia Bank says:
"Some decent news at last. Including auto fuel, sales rose by 1.4% m/m. Stripping that out, sales were up by 0.9% m/m.
"Headline sales were always going to be supported by a bounce in auto fuel sales. However the strength was not all down to auto fuel. Clothing sales bounced by almost 3.5 pct. April was a washout, so consumers' appetite for spring fashion was dampened. By contrast, there were 60 pct more sunshine hours in May (and 10 pct more than the seasonal norm), and it was also a bit warmer, which helped to boost this component.
"The trend in consumer spending should be improving as the burden from non-discretionary spending (i.e. food and energy) continues to ease, which makes more room for faster discretionary spending.
"The trend in retail sales should therefore be upwards from here, helping to contribute to better news for growth as the year progresses."
Yesterday, saw the release of the BoE minutes from the June meeting that revealed that Governor King voted in line with David Miles and Adam Posen for an extra £50bn of QE, while Paul Tucker wanted £25bn more.
The motion was defeated by the narrowest of margins at 5-4.
"Our economists notes that this clearly signals the prospect of further quantitative easing, and Eurozone developments over the last few weeks increase the prospect of a July injection," says an FX note at Scotiabank.
The Bank of England allocated the full GBP 5 bn on offer at the inaugural auction of its Extended Collateral Term Repo facility. The bank did not reveal how much liquidity was sought however, nor did it announce how many banks bid for a share of the funds. As such, the announcement provides an incomplete picture of underlying liquidity demand.