THE TAKEAWAY: GBP Retail Sales ex Auto Fuel (APR) > -1.4% versus +0.1% expected, from -0.7% (revised higher from -0.8%) (m/m), +0.2% versus +1.8% expected, from +0.4% (y/y) > Retail Sales w/ Auto Fuel (APR) > -1.3% versus +0.1% expected, from -0.6% (revised higher from -0.7%) (m/m), +0.5% versus +2.0% expected, from -0.5% (y/y) > Bank of England May meeting Minutes show split MPC over more QE > GBPUSD BEARISH
Despite a strong 1Q’13 GDP report, it appears that the British economy is losing steam, in thanks to a slowdown in consumption trends. According to the Office for National Statistics, the slowdown in Retail Sales can be wholly attributed to a slump in food prices in the early-2Q, exacerbated by what’s being described as ‘poor weather.’ Regardless, in light of disinflating price pressures (per the April CPI report), the slowdown in sales can be viewed as a shift towards slower growth once more.
Concurrently, the Bank of England releases the Minutes from its May meeting as well earlier, noting the Monetary Policy Committee’s concern for inflation (per the majority’s perspective, as outgoing Governor Mervyn King was outvoted once more, 6-3). “There was tentative evidence that measures of medium-term inflation expectations were becoming more sensitive to short- term news in inflation...Financial markets were not expecting further asset purchases at this meeting and might, at the margin, reassess the committee’s tolerance of elevated inflation should additional stimulus be injected.” If inflation continues to fall, incoming BoE Governor Mark Carney may be forced to implement additional policy measures, which would be GBP-negative.
[Read: Stay Away from Mark Carney!]
GBPUSD 1-minute Chart: May 22, 2013
Charts Created using Marketscope – prepared by Christopher Vecchio
Following the release, the GBPUSD fell from 1.5135 to as low as 1.5073, as a major function of the UK’s headline GDP reading floundered. At the time this report was written (approximately 30 minutes after the reports), the GBPUSD had regained 1.5095. Volatility is likely to remain elevated over the next several hours thanks to several key Federal Reserve events on the docket.
--- Written by Christopher Vecchio, Currency Analyst
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