The Pound advanced to its highest level in two-months against the Australian Dollar, a fresh two-week high against the US Dollar and advanced from a 16-month high against the Euro on Wednesday after data showed that UK retail sales smashed economist forecasts in April and as Bank of England policy makers voted unanimously to leave interest rates unchanged.
Sterling surged against the majority of its most traded peers after a report released by the Office for National Statistics showed that retail sales climbed the most in three years.
The data showed that retail sales jumped by 1.3% last month, twice as much as the figure expected by economists. The surge was a result of discounted goods and robust food sales over the Easter holiday period.
Compared to the previous year retail sales were up by a whopping 6.9%.
“Elevated confidence, markedly higher employment and a much improved housing market overall are all supportive of consumer spending. The encouraging prospect for retailers and for overall growth prospects is that consumer’s purchasing power should pick up over the coming months,” said Howard Archer, an economist from IHS Global Insight.
The latest Bank of England minutes also provided support to the Pound as they suggest that some policy makers are edging closer to voting for an interest rate rise as the UK economy continues to strengthen.
The Australian Dollar was already under significant pressure from declining iron ore prices and data which showed that consumer confidence in the land down under fell unexpectedly in May.
Sentiment towards the US Dollar remains vulnerable as investors look ahead to the release of the latest Federal Release policy meeting minutes. Economists will be looking for further indications on the central banks view of the economy.
The Euro meanwhile remains under pressure from expectations that the European Central Bank will introduce new monetary easing measures at next month’s policy meeting.
Pound Sterling – Updated 22/05/2014
After riding high for most of the week the Pound’s bullish run came to an end on Thursday and the currency pared gains against the US Dollar and Euro.
Tuesday’s upbeat UK inflation report and yesterday’s impressive domestic retail sales surge helped Sterling achieve fresh highs against several of its rivals.
However, as investors had been hoping for a positive surprise from this morning’s UK GDP data, the Pound softened after the as-forecast result was released.
The British currency registered its first decline against the ‘Greenback’ for six days as investors considered the news that the UK economy expanded by 0.8 per cent in the first three months of 2014.
The Pound pared its 0.8 per cent five-day gain against the US Dollar and was slightly weaker against the Euro.
Separate figures compiled by the Office for National Statistics showed that net borrowing stood at 11.5 billion pounds in April.
In the same period of 2013 net borrowing came in at 9.5 billion Pounds.
As highlighted by London-based forex expert Lee McDarby; ‘The market likes an upside surprise for the Pound. Obviously we’re a bit spoilt now given that anything merely in line is deemed to be a disappointment.’
The Pound also fluctuated against the Euro as manufacturing/services PMI for the Eurozone and its largest economies was released.
Later today additional GBP/USD movement could occur as a result of US manufacturing figures, initial jobless claims data and the domestic existing home sales report.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6870,
Pound Sterling,,Euro,1.2332,
Pound Sterling,,Australian Dollar,1.8243,
Pound Sterling,,New Zealand Dollar,1.9671,
US Dollar,,Pound Sterling,0.5927,
Euro,,Pound Sterling,0.8107,
Australian Dollar,,Pound Sterling,0.5477,
New Zealand Dollar,,Pound Sterling,0.5072,
[/table]
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