Pound Declines against USD Due to Poor Retail Sales Data

The major currency of United Kingdom, Pound went towards its weakest level in last 30 days against USD. An industry report came out stating that retail sales of United Kingdom have gone down in December. This started speculation that the British economy has lagged behind the US. Incidentally, not only against USD, but Pound experienced a fall against most of its major counterparts. Right on this week, the officials of Bank of England will meet and according to economists, interest rates will be kept at a record low figure. The British Government is trying hard for an economic recovery and this move is expected to help that cause.

The economy of this major European country shrank by 0.1% in 2012, in comparison with the 2.2% growth of that of US. Because the investors are looking for safer assets, the British gilts rose, however, the 10-year yield went down to the lowest figures in the last 7 days.

The Pound actually slumped by 0.5% against USD and is priced at $1.6037 currently. Against Euro, it declined by 0.1% and is at 81.45 pence per Euro. The total gain for Pound, in 2012, incidentally was of 2%.

According to Peter Kinsella, who works as the Senior Foreign Exchange Strategist of Commerzbank AG, the US growth is certainly outperforming that of UK and the situation is kind of similar to the one experienced in the 1980s. He also commented that the GBP-USD exchange rate may go to even lower levels in 2013.

The retail sales growth of UK for the stores which were open for at least a year decreased to 0.3% in December, from 0.4% of November. According to economists, the asset-purchase target set by the British policymakers will be kept at 375 billion Pounds.
The British Prime Minister has already stated that the country is going through a tough economic situation and he sought help from the countrymen to come out of this bad time.

The 10-year British gilts went down by 6 basis points to 2.03%. This marks its biggest decline since 27th December. On the other hand, the 1.75 percent bond which is due in September, 2022 increased by 0.50 and is at 97.58 currently. Today, around 1.5 billion British Pounds of the 4.75 percent bonds due in December, 2030 was sold by the British Debt Management Office.