Pound’s rally faces setback following weak retail data – London Business News | Londonlovesbusiness.com

The British pound recorded some price corrections end of last week and retreated from a high point after a strong rally that began in early July.

The sterling reached notable levels, revisiting 1.30 against the dollar for the first time in a year, hitting a two-year high against the euro, and reaching a 16-year high against the Japanese yen.

Sticky inflation could make it difficult for the Bank of England to decide if it should lower interest rates from a 16-year high. At the same time, June retail sales in the UK fell by 1.2%, worst than expected, reversing a 2.9% increase in May. This unexpected drop could imply risks for the economy and could impact the pound going forward.

Treasury yields could remain under pressure as traders see an increased chance for an interest rate cut in August. The possibility of additional cuts this year could also push yields to the down side.