The British pound falls after slump in UK retail sales

The Pound fell against the dollar and euro on Thursday after UK data showed retail sales unexpectedly fell, raising doubts about economic recovery. The Sterling had surged sharply in recent weeks along with some other risk taking currencies on optimism over the global growth outlook. But investors are reassessing such views as economic data has been mixed. UK retail sales fell 0.6 percent in May from the previous month, against a forecast of a 0.4 percent gain, data showed on Thursday. That left them 1.6 percent lower than in the same month a year ago. BoE Governor Mervyn King said late on Wednesday there were some signs the British economy was starting to stabilize, but it was too early to remove the huge degree of stimulus from the economy. The Confederation of British Industry said its monthly industrial trends survey's total order book balance rose to -51 this month from -56 in May. The GBP/USD is currently trading at $1.6415 as of 8:44am, London Time.

The Dollar and the Yen rose as concern that political tension in Iran is worsening and a World Bank report said that the global recession will be deeper than earlier predicted fanned demand for the currencies as a refuge. The JPY strengthened versus all 16 major currencies after Iran’s government detained five members of former President Rafsanjani’s family and said at least 17 people had been killed during protests over this month’s disputed election. “There is growing uncertainty over what will happen in Iran that seems to be sparking risk aversion,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest bank. “This would be supportive of the yen.” The Dollar Index which tracks the U.S currency against the currencies of six major U.S. trading partners including the euro, yen and sterling, gained 0.3 percent to 80.48. The EUR/USD is currently trading at $1.3880 as of 8:56am, London Time.

The German business confidence rose for a third month in June, providing further evidence that the recession in Europe’s largest economy may be coming to an end. The Ifo institute in Munich said that the business climate index, based on a survey of 7,000 executives, increased to 85.9 from 84.2 in May. “Optimism is the wrong word,” said Holger Schmieding, chief European economist at Bank of America-Merrill Lynch in London. “Pessimism is abating. There’s evidence that the global economy has seen the trough and while Germany won’t immediately benefit, it will profit disproportionately later due to its focus on investment goods.”

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