The Pound US Dollar (GBP USD) exchange rate strengthened on Thursday, reaching a new three-week high following better than expected Retail Sales in the UK.
The Office for National Statistics (ONS) reported that sales surged from -0.5% to 1.4% in February, outpacing analysts’ expectations that sales would only grow 0.4%.
However economists were quick to point out despite sales beating expectations last month, figures still showed their worst three-month decline in nearly seven years, with many predicting that sales will soften again over the coming months as consumers are pressured by rising inflation and anaemic wage growth.
Howard Archer at IHS Markit said;
‘The economy’s persistent resilience since last June’s Brexit vote has been largely built on consumers keeping on spending. With consumers now seemingly moderating their spending, the long-anticipated slowdown in the economy looks set to materialise unless other sectors can make significantly increased contributions,’
Meanwhile the US Dollar struggled to repel Sterling’s advances yesterday as USD investors await the US House of Representatives’ vote on Trump’s American Healthcare Act (AHCA).
This will be the real test of the new administration’s legislative strength, with markets expected to shy away from the ‘Greenback’ if the bill fails to pass as it prompts questions over Trump’s ability to push through his much anticipated economic policies.
The focus on ‘Trumpcare’ has lead markets to largely ignore economic data coming from the US today despite an upbeat US housing report.
New Home Sales leapt from 558,000 to 592,000 last month, showing growth of 6.1%, a significant improvement over the 0.7% rise predicted.
The GBP USD exchange rate may pusher higher again on Friday as the British Bankers Association (BBA) is expected to report a rise in the number of Mortgage Approvals for the month of February.
Meanwhile the US Dollar may be weakened by the latest US Durable Goods Orders data as orders are expected to have fallen from 1.8% to 1.2% in February.
However looking further ahead the Pound is likely to begin ceding ground to the US Dollar next week as the UK government invokes Article 50, officially starting two years of complex negotiations to split from the EU and creating a great deal or market uncertainty.
Current Interbank Exchange Rates
At the time of writing the GBP USD exchange rate was trending around 1.25 and the USD GBP exchange rate was trending around 0.79.
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