Forex: GBP/USD – Sterling bullish in London session
iNVEZZ.com Thursday July 18th: The pound continues to climb against the dollar today, adding more gains to reach 1.5241 in in the second half of the European session.
The UK’s Office for National Statistics reported today that retail sales rose by 0.2 percent in June m/m, in line with expectations and by 2.2 percent compared to the same month last year, above expectations for a 1.7 percent gain. Additionally, Core Retail Sales, which excludes motor vehicles, rose by 0.2 percent in June, in line with forecasts, after increasing 2.1 percent in May.
Demand for the dollar continues to be strongly attached to market expectations that the Federal Reserve will start to unwind its bond buying before the end of this year, an assessment not compromised by anything in Chairman Ben Bernanke’s report to the Lower House of the US Congress yesterday.
Bernanke, who is set to retire from the post in January, said that economic recovery was continuing at a moderate pace but reiterated that monetary policy will remain accommodative for the foreseeable future and that any decision by the Fed to scale back its asset purchases remains dependent on continuing improvement in the economic data.
Yesterday, the also Washington-based International Monetary Fund expressed the opinion that the British government needed to do more to boost credit and strengthen banks, since, in its view, fiscal stimulus by the Bank of England can have only a limited effect on the recovery process.
The IMF believes that while the UK economy is showing signs of recovery, the process continues to be “slow and fragile”. It recommended that, in addition to further gilts buying, the BoE should provide “reassurance that interest rates will remain low until recovery reaches full momentum”.
Krishna Srinivasan, who led the IMF review, told a press conference following the release that, “Notwithstanding recent developments, the UK economy remains a long way from a strong and sustainable recovery.” The IMF thought that the outlook remains for “significant headwinds, notably from private-sector deleveraging and a weak external outlook”. Said Srinivasan, “The risk of hysteresis is still there.”