21 July 2005, 13:53  Sterling boosted by strong UK retail sales data

Sterling rose after data released this morning revealed an unexpected surge in UK retail sales in June The figures showed that retail sales rose by 1.3 pct from May, the largest monthly rise since December 2003 and way in excess of expectations, with the market consensus calling for a rise of just 0.3 pct The pound rose particularly against the euro, which has seen a strong run over the last few days, propelling it close to the 0.70 stg mark At 09.55 am, the euro was trading at 0.6957 against the pound, down from 0.6971 just before the data was released. Against the dollar, the pound rose to 1.7484 from 1.7449 previously The figures were a "nice surprise", said David Page at Investec, noting the good weather in June as well as anecdotal evidence from retailers themselves that sales had picked up after a disappointing May The pessimism of the market ahead of the figures was largely on the basis of a very weak survey by the Confederation of British Industry earlier this month which said retail sales fell to their lowest in the survey's 22-year history, he said Although the figures are encouraging, they are unlikely to be sufficient to dampen expectations that the Bank of England will cut interest rates at its next meeting in August, although it may temper speculation of another rate cut later in the year, Page said The Monetary Policy Committee will be concentrating on the outlook for GDP growth, which looks to be below trend at the moment, while retail sales could well see a retracement in July, he said

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