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Market Update

Sterling rose slightly but remained under the $1.25 mark after hitting almost three-week lows as retail sales rebounded in May more strongly than hoped with the country gradually relaxing its coronavirus lockdown.

British retail sales jumped 12% last month after a historic 18% slump in April, official data showed. Consumer confidence figures for May were the strongest since the lockdown began but remained weak overall, according to a separate survey.

Bank of England Governor Andrew Bailey said on Thursday the economy appeared to be shrinking a bit less severely in the first half of 2020 than the BoE feared last month.

The pound slumped more than 1% against both the euro and the dollar on Thursday after the BoE increased its bond-buying programme by 100 billion pounds ($124 billion) to bolster the coronavirus-hit economy.

The central bank also kept its benchmark interest rate at 0.1% and said it expected a new total of 745 billion pounds in government bond purchases by the end of the year.

Brexit-related risks also continued to weigh on sterling. British Prime Minister Boris Johnson told visiting French President Emmanuel Macron on Thursday that talks on a post-Brexit deal cannot drag on into the autumn.

Britain left the EU on Jan. 31 but talks on a future relations have so far made little progress, with both parts saying a deal is achievable, but they also say time is running out and the prospect of a no-deal outcome remains.

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