Pound, the major currency of UK, went down to a figure that’s the lowest in a month against Euro, as a Government report coming out showed that the UK retail sales declined in last month quite unexpectedly, thereby supporting the case of boosting monetary stimulus by the Central Bank. Pound went down against USD as well and the same is now at a figure that’s the lowest in last 2 months. The minutes of the meeting held between 8th and 9th May shows that Mervyn King, the Governor of the Central Bank of UK was defeated for the 4th straight month in his bid to expand the bond buying. Pound declined further against USD after the comments of Ben S. Bernanke, the Federal Reserve Chairman came out that the US Central Bank may cut the speed of asset purchases over the next few months. The Government bonds of UK were more or less unchanged on today.
According to the Departmental Head of European Hedge Fund Sales at Mizuho Corporate Bank, Neil Jones, the report of retail sales is going to add a downward pressure to the Sterling. Jones added that he and his company has more optimistic view on the UK market, if compared to market consensus, however, the data coming out will definitely be paving way for further quantitative easing and hence, this is not going to be helping Sterling in anyway.
Sterling experienced a drop of 0.5% on today and it is currently priced at 85.56 Pence per Euro. At one point of time, it declined to 85.90 Pence, marking its weakest figure since 22nd April. Against USD, Pound dropped to $1.5020, marking its lowest value since 14th March.
UK retail sales figures including fuel declined by 1.3% in April, if compared to the figures of March. In March, it declined by 0.6% as well, as mentioned by the Office for National Statistics. Economists predicted that the same will be increasing by 0.1%; however, the actual results were different. A separate report that came out on today showed that the underlying budget deficit increased further.
According to Senior Currency Strategist of Royal Bank of Canada, Elsa Lignos, as the retail sales data was much weaker if compared with estimates, it was used as an excuse for selling Pound. Lignos thinks that the market is entering another negative sentiment period for Pound.