Recent fundamental data releases from the U.K. have shown signs of economic life.

Retail sales, the lifeblood of many industrialised nations, remain in positive territory. In April, the latest month for which figures are available, sales rose 0.9% m/m and remained 2.6% higher than in April 2008. This is in stark contrast to the U.S., where retail sales are down −9.6% y/y even after a 0.5% m/m rise in May, driven almost entirely by sales of petrol, automotive clearances, and retail building materials.

The next release of U.K. retail sales is scheduled for Thursday, 18 June, 8:30 AM GMT (6:30 PM Canberra time). Forecasts are varied; however, a 0.3% rise for May is a median estimate.

The U.K. housing market has recently shown signs of stabilisation. Home prices have risen slightly within the past few months, including 2.6% in the Halifax reading for May, and improved readings have also been noted in net lending secured on dwellings and mortgage approvals.

Unemployment has risen steadily for five quarters and is not expected to fall before 3Q2010. The economy is expected to lose 60K jobs at the next employment change announcement, 17 June, 8:30 AM GMT (6:30 PM Canberra time) and the rate is expected to tick up from the current 7.1% to 7.3%. This makes the readings for home and retail sales even more impressive.

Industrial production in the U.K. reached its lowest level in March after falling since March 2008, and the last two announcements have shown small rises although it remains 12.3% lower on the year. In part this is due to rising commodities prices, which have encouraged oil and gas exploration in the North Sea; automobile production has also risen.

PMI readings have also improved lately and past estimates have been revised higher. Readings for May registered 45.4 manufacturing from an upwardly revised 43.1 previous; 45.9 construction, surging from 38.1 previous; and 51.7 services, surpassing 50.0 which marks the breakeven level between expansion and contraction.

Consumer prices in the U.K. remain stubbornly high, despite disinflationary pressures that have reduced CPI readings into flat or even negative territory in the U.S. and the Eurozone. While these figures in themselves will not allow for a BoE rate hike within 2009, they may allow for an earlier unwinding of quantitative easing programmes. Below is a table comparing these figures:

Note that figures for the U.K. and the Eurozone were released Tuesday, 16 June, whereas the U.S. figures are scheduled for release Wednesday, 17 June, at 12:30 PM GMT (10:30 PM Canberra time).

Set against fundamental data that is only possibly stabilising in the U.S. while that in the Eurozone is still falling, the recent strength in GBP becomes more understandable. EUR/GBP remains in a downtrend and has crossed beneath its MA-200 on daily charts, as shown below:

GBP/USD, on the other hand, is having trouble pushing through resistance at 1.6610, a level respected as long ago as late October 2008. If U.K. retail sales or employment change surprise positively this level could surrender. However, this could also be a double-top formation in progress: