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EUR and USD weakness leaves GBP high

EUR and USD weakness leaves GBP high

The UK high street did not enjoy the anticipated boost from the Jubilee celebrations as the wettest June on record kept shoppers away. June’s retail sales volumes (excluding fuel) rose by only 0.3%, despite the extra bank holiday. Heavy discounting in clothing and footwear pushed volumes up by 2.5%, however, there was a large drag from food stores which suffered a 0.7% reduction in volumes.

Investors’ mixed appetite for eurozone debt was highlighted yesterday as Spain saw five year borrowing costs surge to nearly 6.5%, up 0.4% compared to a month ago. Spain is fighting to maintain access to international bond markets to fund its budget deficit as investors remain unconvinced by austerity measures and anaemic growth prospects. In contrast, French yields for similar bonds fell by 0.9%.

In the US the number of people filing new claims for unemployment benefit surged last week after a seasonal quirk caused a sharp drop the previous week. Claims increased by 34,000 mainly due to the annual car plant shutdowns for retooling which created volatility in the statistics. This reversed several weeks of reductions in the jobless figures and points to a slowing in the labour market.

Despite the weak retail data Sterling proved resilient as investors sought safe haven assets outside the indebted eurozone. GBP/EUR rose to €1.2833, the highest since October 2008, before easing back. GBP/USD also registered gains hitting a high of $1.5723 and is trading around the $1.57 level early this morning.

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