Pound Approaches Four-Month Low as Retail Sales Data Add to Woes

(Bloomberg) -- The pound headed for a four-month low as U.K. total retail sales dropped the most on record in April.

The data are the latest in a string of weak economic reports that have weighed on the U.K. currency and battered the chances of an interest-rate increase from the Bank of England on Thursday. Sterling’s fate may depend on whether BOE Governor Mark Carney keeps the possibility of a rate hike in 2018 alive.

Data from the British Retail Consortium showed same-store sales plunged 4.2 percent from a year earlier. A 3.1 percent decline in total sales, while distorted by the timing of Easter, was the sharpest since the survey began in 1995.

The BRC report makes “pretty dismal reading,” said Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce. “Unless and until there are signs of improved data, we would continue to prefer playing GBP from the short side.”

The pound fell 0.2 percent to $1.3523 as of 9:04 a.m. in London, after touching $1.3499. It fell to $1.3485 Tuesday, the lowest level since Jan. 11. Sterling was steady at 87.51 pence per euro.

The odds of a rate hike at the BOE’s meeting have slumped to around 10 percent from around 90 percent in late-March amid signs of a slowing economy and after Carney warned that a hike in May was far from certain.

U.K. government bonds dropped before the Debt Management Office auctions 2.75 billion pounds of gilts due in October 2028 at 10:30 a.m. The yield on bonds due in December 2027 rose three basis points to 1.47 percent.

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net.

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Keith Jenkins, Neil Chatterjee

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