Sterling weakened against the dollar on Thursday as a mixed set of UK data did little to change expectations for further Bank of England interest rate hikes this year, which are already priced into the market. British retail sales rose 0.4 percent in May, outpacing forecasts and recovering from April's fall.
But the retail sales deflator slowed from April's eight-year high, reflecting signs that price pressures are easing. A survey by the Bank of England showed Britons' expectations of future inflation remained steady at the series high in May. Earlier, a separate survey showed British house price growth eased to its slowest in more than a year.
Taken together, the reports did nothing to change expectations the Bank of England would hike interest rates, already the highest in the G7, twice more this year. "Retail sales were only tiny a bit better than expected, but they are also volatile," said Paul Robinson, currency strategist at Barclays Capital. By 1430 GMT, the pound was down 0.2 percent at $1.9689. It was down a quarter percent at 67.65 pence per euro, off its three-month high set on Wednesday.
"The onus is on the data flow to stop the MPC hiking at the August meeting and there is nothing in (today's retail sales) data to do that," said Adam Cole, currency strategist at RBC Capital Markets.
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