The pound declines to a one-month low against the euro after weaker UK data & BOE minutes
The main focus of the European morning session was on the UK and GBP. The Bank of England preserved their 6-3 vote on QE. This was perhaps a more dovish outcome than expectations given that the market had seen the risk of 1 or 2 members switching to a less dovish stance on QE after the slightly more upbeat tone in the Inflation Report. Overall the minutes were broadly in line with the Inflation Report. UK retail sales data were very weak in April at -1.4% versus 0.1% expected. Although this is a volatile series, it does highlight that with employment softening, wage growth weak, saving rates rising, borrowing subdued and price inflation high, it seems unlikely that private consumption is set to drive a recovery in the UK. With the MPC vote on QE and after the recent softer CPI data this week many market participants foresee a lower hurdle for more QE which may play out negative for GBP.
