UK Retail Sales Beat Fails to Move Sterling as ECB Stays Defensive

Sterling barely moved Friday after UK retail sales beat forecasts. The data did not alter the Bank of England's rate path. The session was thin. US markets were closed for the Juneteenth holiday, with futures halting at noon Eastern time.

The UK retail sales report came in stronger than expected across the board. The market reaction was muted. Traders said the upside surprise did not change the BoE's trajectory, given inflation and wage growth remain the committee's primary focus.

European Central Bank officials Philip Lane and Pierre Wunsch defended the June rate hike. Wunsch acknowledged that easing geopolitical tensions involving Iran and moderating wage growth could strengthen the argument that the ECB might have been able to look through the energy-driven inflation spike. He maintained that last week's decision was justified given the information available at the time. Lane echoed the stance, arguing the central bank had not made a mistake by hiking while inflation was rising and uncertainty remained elevated.

Later Friday, Canada's retail sales report is due at 8:30 a.m. ET. The data is not expected to shift the Bank of Canada's policy outlook, economists said. No other major releases are scheduled until next week.

GBP/USD held near 1.2700, little changed on the session. EUR/USD remained range-bound near 1.0900. Both pairs traded in thin conditions as US participants were absent.