Yesterday’s inflation data highlighted how the squeeze on the British consumer continues; however, there is some reason for guarded confidence, after retail sales rose in June. Sales were up 0.2% from May, in line with expectations, while year-on-year growth was 2.1%, ahead of the forecast 1.6%, although slower than the May figure of 2.3%.
The net result has been that the pound has managed to make small gains against the US dollar, continuing the trend seen at the beginning of this week. Mark Carney delivered a powerful boost to sterling yesterday, when minutes from the Bank of England showed that the consensus on the Monetary Policy Committee had swung behind, keeping the asset purchases programme unchanged.
For GBP/USD, the target is now the $1.5300 level. Bernanke’s testimony yesterday did not provoke much volatility, with the general perception being that he is still moving slowly towards tapering. Today’s testimony is not expected to produce any radical developments, but uncertainty persists, which is why we are seeing limited moves across the board today.