Pound Gains on Retail Sales

The pound rose for a third day against the dollar after a government report showed U.K. retail sales declined less than economists forecast in April.
TradingEconomics.com, Bloomberg 5/22/2008 6:06:28 AM

The U.K. currency climbed to a two-week high versus the dollar as sales fell 0.2 percent from March, when they slipped by the same amount, the Office for National Statistics said today. Economists forecast a 0.5 percent drop, the median of 30 estimates in a Bloomberg News survey showed. The pound gained against 14 of the 16 major currencies as bets Bank of England will lower rates next month fell to near a three-month low.

The pound was at $1.9763 by 10:15 a.m. in London, from $1.9732 yesterday. It was at 79.66 pence per euro, from 80.03 pence.

U.K. government bonds fell, with two-year yields at a six- month high.

The yield on the two-year note gained 3 basis points to 4.87 percent. The price of the 4.75 percent note due June 2010 fell 0.06 or 60 pence per 1,000 pound ($1,976) face amount at 99.79. The 10-year yield rose 1 basis point to 4.89 percent. Yields move inversely to bond prices.

A technical indicator on two-year notes suggests declines may slow or reverse, as yields have risen almost 50 basis points since the start of last week.

The two-year note's 14-day relative strength index, a gauge of price momentum, was at 27.10 today. A number below the threshold of 30 signals securities are poised to rally.

The odds of a quarter-percentage point rate cut by the Bank of England on June 5 fell to 3 percent, according to a Credit Suisse Group derivatives index.

Pound Gains on Retail Sales