Though holding within a range of approximately 1.8100 - 1.8250, the British pound shot higher this morning on the release of UK retail sales as the index unexpectedly jumped for the second consecutive month.
Indeed, a breakdown of the report shows that the 1.2 percent rise in August was due primarily to gains in sales of clothing and footwear. Nevertheless, as we mentioned yesterday, the Bank of England has noted in the past that they focus more on private surveys over government statistics, as the latter tends to be extremely volatile. Looking at the latest private numbers, BRC same-store sales plunged 1.0 percent in August from a year earlier, signaling that consumption is far from resilient. As a result, there are still downside risks for the British pound from a fundamental perspective, especially since Credit Suisse overnight index swaps are pricing in nearly 100bps worth of rate cuts by the Bank of England.
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British Pound Crosses Reverse Following Large Gains
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British Pound: Why the Jump in UK Retail Sales Was Deceiving
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