The British Pound Sterling moved higher on Thursday November 17, hitting above $1.25 buoyed by incredibly strong set of retail sales data.
The GBP soared in the wake of the release of notably better-than-forecast UK retail sales data from the ONS, PoundSterling Live reports.
Headline monthly retail sales for October rose 1.9%, easily outstripping estimates for a reading of just 0.4% growth which represents the best reading for the sector in 14 years.
The previous month’s reading was 0.1%. Annualised growth now stands at 7.4%, up from a previous 5.3%.
The UK consumer is absolutely undaunted by the prospect of Brexit and because the UK is so heavily biased towards the services sector the data should keep the economy growing as we move forward into Brexit negotiations which are likely to start in the first half of 2017.
The also casts doubt on expectations for consumers to retreat into their shells on expectations of rising inflation resulting from this year’s fall in Sterling.
However, this reading could be as good as it gets according to analyst Paul Hollingsworth at Capital Economics who reckons high-street spending will fail to maintain this pace going forward:
“After all, this week’s labour market figures highlighted that wage growth remains weak. Moreover, despite the slight dip in inflation in October, it still looks set to breach the MPC’s 2% inflation target in spring next year, and will end the year closer to 3%. Accordingly, the squeeze in real income growth is yet to come.”
The lacklustre response by Sterling to the previous day’s labour market data suggested to us that moves in response to the retail sales figures would be limited but it is hard to ignore such a strong reading.
The gains in Sterling following the retail sales release, while evident, are not exceptional and if these were normal times we believe the currency would be rocketing.
