The British pound has steadied in the Thursday session, after considerable losses on Wednesday. In North American trade, GBP/USD is trading at 1.4205, down 0.01% on the day. On the release front, British Retail Sales plunged 1.2%, worse than the estimate of -0.5%. US unemployment claims ticked lower to 232 thousand, close to the estimate of 230 thousand. As well, the Philly Fed Manufacturing Index improved to 23.2 thousand, easily beating the estimate of 20.8 points.
British consumer data has been soft this week, and this will likely raise concerns about the health of the British economy. On Thursday, Retail Sales declined 1.2%, its weakest reading in three months. However, the sharp drop has been attributed to unusually bad weather in March, as blizzards hampered travel in the UK and kept consumers at home and away from shopping malls. The markets shrugged off the weak release, and the pound is unchanged on Thursday.
The pound lost ground on Wednesday, following the release of weak inflation numbers. CPI in March dropped to 2.5%, after six consecutive readings of around 3.0 percent. The soft reading surprised the markets, and the pound responded with losses. The real producer index and other inflation indicators also missed their estimates. Despite the slowdown in inflation and consumer spending, the markets still expect the Bank of England to raise rates at next month’s policy meeting. Policymakers in favor of a rate hike can point to the fact that inflation still remains well above the BoE target of 2 percent and the labor market remains tight. The pound has jumped more than 5% against the greenback this year, and if the BoE raises rates next month, the pound will likely make further gains.
