Pound Strives Higher as UK Retail Sales Expand

The Great Britain pound advanced after the report showed that the retail sales in Britain unexpectedly rose last month, refueling talks about possible increase of the interest rates by the central bank.

The UK retail sales increased by 0.2 percent in March on month-on-month basis, following the drop by 0.9 percent in February. This report surprised analysts, who expected a decrease by 0.5 percent. The public net borrowing was £18.6 billion, in line with forecasts.

You-na Park, a currency strategist at Commerzbank AG, explained the potential changes of the interest rates:

We have speculation about a Bank of England rate hike this year, maybe in the middle of the year, but the Federal Reserve will probably keep its expansionary stance and we expect the first hike only in the beginning of 2012. The BOE will probably begin its tightening this year so the pound is able to gain against the dollar.

GBP/USD traded at 1.6515 as of 2:30 GMT today after it jumped from 1.6407 to 1.6520 yesterday. EUR/GBP traded near 0.8810, following the drop from 0.8848 to 0.8806 on the previous trading session.

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