GBP Falls to Four-Week Low as Strong UK Data Trumps Rate Hike Expectations

The British Pound Sterling (GBP) hit a four-week low against the US Dollar on Monday after a strong week of economic data from Britain. The currency traded below 1.3300, about 0.3% lower than the previous day's close, and returned to levels seen at the beginning of July.

The UK's retail sales rose by 1% in June, beating expectations of a decline, thanks to warm weather and World Cup spending. Consumer confidence also reached a six-month high in July, and preliminary business activity surveys showed the private sector expanding ahead of forecasts.

The Bank of England (BoE) survey indicated easing inflation expectations, while the June Consumer Price Index (CPI) cooled down to 2.6% year-over-year with services dropping to 3.6%. The BoE's Monetary Policy Committee (MPC) can now comfortably ignore growth without worrying about inflation.

The removal of a rate hike argument for holding the currency followed Monday's stand-down between Washington and Tehran, which took nearly 9% out of crude oil prices in a single session. Britain imports its energy, making this a clear improvement in the country's terms of trade and a disinflationary impulse.