The British pound is slightly lower on Friday. GBP/USD is trading at 1.2636 early in the North American session, down 0.17% on the day.
UK retail sales hit 4-month high
UK retail sales jumped 2.9% m/m in May, an impressive turnaround from the revised 1.8% decline in April and blowing past the market estimate of 1.8%. This was the highest level since January. Yearly, retail sales climbed 1.3%, rebounding from a revised 2.3% drop in April and above the market estimate of -0.9%. This marked the sharpest gain since March 2022.
The increase in consumer spending was felt across the economy, as rising wages have helped consumers withstand weak economic growth and high interest rates. The weather was a key factor, as a very wet April dampened retail sales, which rebounded in what was the warmest May on record.
UK GfK Consumer Confidence rose to -14 in June, up from -17 in May and above the market estimate of -17. Consumers remain pessimistic but the confidence indicator has climbed for three straight months and hit its highest level since November 2021.
The Bank of England stayed on the sidelines on Thursday, keeping the benchmark rate of 5.25% unchanged for an eighth straight time. The BoE upgraded its growth forecast for the second quarter and that could mean an August rate cut, which would be the first cut since the BoE embarked on its steep rate-hike cycle to tame high inflation.
Earlier in the week, inflation dropped to 2%, the BoE’s target, for the first time in almost three years. The fly in the ointment is that service inflation is running at 5.7% and will have to come down before the BoE cuts rates.
GBP/USD Technical
- GBP/USD is testing support at 1.2633. Below, there is support at 1.2608
- There is resistance at 1.2679 and 1.2704
