The UK Retail Sales came in at 1.4% MoM in April, an upside surprise. GBP/USD closes in on 1.2500 on the upbeat data. However, economists at ING believe that cable is unlikely to see further gains.

April retail sales provide a reprieve

“UK retail sales have come in a little better than expected and break/suspend the narrative that the cost of living squeeze is large enough to derail the Bank of England tightening cycle. We would not get carried away with the sterling recovery, however. 

“Sterling is showing a high correlation with risk assets – trading as a growth currency – and the outlook for risk assets will remain challenging for the next three to six months probably.”

“Cable may struggle to breach the 1.2500/2550 area and 1.20 levels are very possible over the coming months.”

“New-found hawkishness at the ECB means that EUR/GBP may struggle to sustain a move below 0.8450 before returning to 0.8600.”