GBP to USD Exchange Rate mixed as report shows UK retailers slashed prices at record rate

The GBP to USD Exchange Rate was initially supported on Wednesday due to the release of data which showed a narrowing in the UK’s trade deficit, however as the session progressed the currency softened from recent highs as a report showed that British retailers were slashing prices at the fastest rate on record.

According to the report released by the British Retail Consortium (BRC), UK shop prices in March declined 1.7% lower than at the same time as last year. The drop was the biggest decline in prices in any month since the report was first introduced in 2006 and marked the 11th straight month that prices have fallen.

It may be good news for UK consumers, but investors saw the report as a sign that consumers were continuing to be tight with their spending. The report also dampened speculation that the UK recovery is picking up speed.

“While data has been mixed recently, the glass is more than half full in the case of living. From a trading point of view, a lot of good news is already priced in. It will take something for the Pound to appreciate further, such as the Bank of England indicating it might have to raise interest rates sooner than the market thinks,” said a senior currency strategist at Commerzbank AG.

The Bank of England will announce its latest interest rate and quantitative easing plans tomorrow. The Central Bank is expected to leave rates unchanged at the record low level of 0.5% and maintain its QE purchases at £375 billion.

The US Dollar meanwhile remains under pressure from last week’s weaker than expected jobs data. The currency is likely to see some volatility later in the US session when the Federal Reserve releases the minutes of its March policy meeting.