Retail Sales Give Brief Boost For The Pound

17 August, 2012

Simon Eastman

Thursday saw a surprise rise in sterling across the board as retail sales came out better than expected for July. Analysts expected a posting of 1.4% for July whereas we actually saw that doubled to 2.8%, a hefty increase. The unexpected rise lead investors to believe the UK economy may not be as bad as we thought, despite the rise in inflationary figures the day before which we would have expected to have a negative impact on such things as retail sales. Higher inflation means higher household costs and less disposable income so you would think less money to spend in the high street…. apparently not from yesterday’s figures.

“The data of late – retail sales and unemployment – has been impressive, despite concerns about growth and at the margins this is helping sterling,” said Chris Walker, currency strategist at UBS.

As a result the pound rose to its highest level since late July against the US dollar and made significant gains against the Euro rising nearly a cent before hitting a resistance point and tailing off during the close of trading. This goes to show that keeping in close contact with your broker, if you have a requirement for buying Euros coming up, can make all the difference as this morning we open close to the levels we opened at on Thursday, all the gains lost. On a purchase of €200,000 if you were buying this or yesterday morning compared to the peak yesterday would make a mighty £1,250 difference to the cost!! On that note, make sure your personal broker has all contact numbers for you so that we can do our best to keep you in the loop of such opportune moments to purchase, which could as shown save you thousands!

The fact that recent data in services and manufacturing have shown the UK is still troubled by recession, underlined by the Bank of England downgrading growth to 0%, and showing that the UK still is in trouble and as such the pound will remain under pressure as investors stay cautious. This means that any boost the pound has will almost certainly remain short-lived so a rise should not lead currency buyers to expect a continued rise.

With no UK data out today, the pound will be lead by results from the EU and US. Trade balance and current account data from the EU, along with PPI data from Germany will affect the Euro while Stateside a consumer confidence survey along with a couple of other data releases will lead afternoon trade. With the pound often caught up in the “currency see-saw” whereby one currency sits in the middle led by the other two (US dollar, Euro & Pound) the lack of UK data today could mean the pound is more susceptible to the other two currencies’ performance. Finally for those looking to send money to Canada, we have the all important consumer price index released at lunchtime. Being a major commodity lead currency, a weaker number could well affect investor sentiment and in turn the pound (which often benefits when sentiment and risk appetite is high).