UK retail sales rebound, Pound dips

The British pound has posted losses for a second straight day. In the European session, GBP/USD is trading at 1.3446, down 0.43% on the day.

UK retail sales posts 0.9% gain

The UK wrapped up the week with the June retail sales report. The gain of 0.9% m/m was a strong rebound from the 2.8% drop in May but missed the market estimate of 1.2%. The driver of the positive release was an increase in food and motor fuel. Yearly, retail sales rose 1.7% following a 1.1% decline in May and just shy of the market estimate of 1.8%. Retail sales recorded growth across all main sectors, boosted by the unseasonably June weather.

Will BoE lower rates in August?

The Bank of England finds itself between a rock and a hard place ahead of the August meeting. The labor market is showing cracks, which supports the case for a rate cut, but inflation has been moving higher and lowering rates could boost inflation even further. In June, inflation was hotter than expected. Headline CPI rose to 3.6% from 3.4%, and core CPI climbed to 3.7% from 3.5%.

There are differing opinions among board members regarding rate policy and this was clear to see when the board at the June meeting, when six members voted to hold rates while three voted to lower rates by a quarter point to 4.0%. Today's retail sales report was the final tier-1 event before the August meeting and investors will be monitoring any comments coming from BoE officials, looking for a hint as to whether the Bank will cut rates or stay or remain on the sidelines at the next meeting.

• GBP/USD has pushed below support at 1.3476 and tested support at 1.3447 earlier. Below, there is support at 1.3390
• There is resistance at 1.3533 and 1.3619