Next hurdle for sterling is the June retail sales report due Thursday - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, notes, "for its part, sterling rallied from a little below $1.26 on June 21 to a high today near $1.3125. The media was abuzz about a rate hike after a close vote at the last MPC meeting and what some saw as confusing comments by BOE Governor Carney."

Key quotes:

"Talk of a rate hike in August was exaggerated from the get-go and today's unexpected decline in some inflation measures drove home the point."  

"Recall that at the end of January, the September short-sterling futures contract implied a yield of about 50 bp,  By the middle of June, it had fallen back to 30 bp.  The rate hike scare pushed it to an about 43 bp at the end of June.  Today it is at 34 bp."   

"The next hurdle for sterling is the June retail sales report due Thursday.  A modest recovery is expected after sharp declines were recorded in May.   As the CPI figures showed earlier today, clothing and footwear was discounted and this may have helped bolster consumption.   Note that retail sales averaged a monthly gain of 0.4% in 2016.  It has been averaging 0.1% a month this year through May."