A touch of Euro weakness has been seen in afternoon trading, losing ground versus the Pound and the Dollar. Sterling initially sold off following the release of a larger-than-expected 1.2% fall in the volume of retail sales in March. But as often the case in recent months FX markets faded the move while analysts partly blamed weak retail sales on cold and wet British weather in March.
The combination of soft UK wage, CPI-inflation and retail sales data does not seem to have materially changed markets’ view that the Bank of England will hike rates 25bp in May. Nevertheless, Sterling is weaker against the majors so far this week, with markets seemingly tempering expectations of a second rate hike in H2 2018.
Sterling has appreciated about 5% in the past six months but it has perhaps become less clear what will drive the next leg up in the currency near-term.
