The pound edged up 0.14% against the dollar to 1.5692, close to five-month highs of 1.5743 hit earlier in the session. Yesterday , the Bank of England trimmed its forecast for growth this year to 2.4%, down from 2.9% three months ago. The central bank also said it expects inflation, which currently stands at a record-low zero, to return to its 2% target in two years’ time, little changed from its last report. Earlier Wednesday, the U.K. Office for National Statistics said the unemployment rate ticked down to 5.5% last month from 5.6% in March, hitting the lowest level since September 2008. The report also showed that the U.K. claimant count change dropped by 12,600 in April, confounding expectations for a 20,000 decline.
In Europe, GDP growth in the euro zone rose by 0.4% in the first quarter expanding at its fastest pace in nearly two years. Growth was particularly strong in France and Italy, which expanded at rates of 0.6% and 0.3% respectively. Both economies had stagnated in the previous quarter. For the first time since early 2010, the top four economies in the euro zone recorded growth. One day after making a €750 million payment to the International Monetary Fund to repay a 2010 loan, Greece virtually eliminated the possibility of holding a referendum on a host of austerity measures deemed necessary to receive a critical stimulus package from a troika of creditors. Greece is running out of time until a four-month extension from its creditors, otherwise known as the “Master Financial Assistance Facility Agreement,” expires in late-June.
The dollar dropped to three-month lows against a basket of other major currencies on Wednesday, after data showed that U.S. retail sales rose less than expected in April fuelling fresh concerns over the strength of the country’s recovery. The Commerce Department said retail sales were unchanged, compared to expectations for a 0.2% increase. March’s figure was revised up to show a 1.1% increase from 0.9%, but this was offset by underlying weakness in the report. Core retail sales, which exclude automobile sales, rose just 0.1%, undershooting forecasts for a 0.5% gain. The data underlined expectations that the Federal Reserve will delay hiking rates until later in the year, after recent figures showed that the U.S. economy expanded just 0.2% in the first quarter. The U.S dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.94% to 93.81, the lowest level since the 6th February.