Brown Brothers Harriman’s (BBH) Elias Haddad says GBP/USD is firmer on broad US Dollar (USD) weakness despite mixed United Kingdom (UK) data.
Haddad notes July retail sales fell, partly reversing prior strong gains, while the August PMI surprised to the upside with a four-month high composite reading
Haddad judges market pricing of 50 bps Bank of England (BoE) hikes over twelve months as too aggressive, though the UK’s growth-inflation mix still supports the Pound. Retail setback versus PMI upside “GBP/USD is firmer on broad USD weakness. Today’s UK set of economic data was mixed.
Retail sales declined in July, partly reversing the previous two months’ strong gains.” “Total retail sales volumes fell -0.5% m/m vs. 0.7% in June (revised down from 1.0%). Excluding automotive fuel, retail sales fell more than expected by -0.9% m/m (consensus: -0.5%) vs. 0.9% in June (revised down from 1.1%).” “UK August PMI surprised to the upside. The composite PMI increased to a four-month high at 52.5 (consensus: 51.6, prior: 52.2) reflecting a sustained turnaround in service sector activity which offset a slowdown in manufacturing production growth.” “The swaps curve continues to fully price-in 50bps of BoE rate hikes in the next twelve months.