Today's UK retail sales incredible surge in May by 3.5% m/m and 8.1% y/y could boost the british pound across the broad pushing the cable above 1.97. The surprising consuming data could contain the market sentiment after Mervyn King's letter to Chancellor of the Exchequer Alistair Darling which indicated that the current high inflation rate above 3% is temporary and it is to go lower but it can rise above 4$ in the next half of this year. The inflation rate has reached 3.3% y/y in May and the market was expecting 3.2% and .6% m/m from .8% m/m in April. The pound declined after the data not as the rising inflation currently does not smooth the way for a rate hike but it tells that the buying power of the British pound is going lower and the BOE is hold back from tightening as the weak growth. The high prices can tackle the growth further as it tackles the demand. The continued high prices of energy and commodities are going against the demand from another side which make the British economy outlook is threat by the recession forces which surely can dampen the demand for the cable which was almost rises recently in the times of the greenback weakness not on an optimistic change in UK as what have come today from May UK retails sales figures. The recent BOE minutes have shown that the members are split between hiking, rising or keeping and all the options have been discussed and they are all reasonable but what's the worst to work against it? The answer is still flexible and unknown yet!
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com
