Pound Withstands Retail-Sales Plunge With Rebound Holding Firm

  • Sterling jumps most in six weeks from lowest since March 2009
  • U.K. retail sales fall more last month than analysts forecast

The pound jumped the most in six weeks as an advance in global equity and commodity markets bolstered the U.K. currency, even after a report showed Britain’s retail sales fell in December more than economists forecast.

Sterling gained as oiljumped more than 6 percent in London, and stocks rose for a second day. The U.K. currency climbed from its lowest level since March 2009, which was reached earlier this week amid signs of a faltering economic outlook both domestically and globally.

Meanwhile, Bank of England Governor Mark Carney said the time to increase interest rates was “unknowable,” damping prospects for further currency gains. The central bank has held off raising interest rates amid near-zero inflation.

“The pound has lost substantially in line with the oil price, so now the oil price is recovering a little, so is the pound,” said Esther Reichelt, a Frankfurt-based currency strategist at Commerzbank AG. There has been “a high uncertainty in the market as to what the BOE will do. Hence the strong sensitivity to the oil price. With the falling oil price it was clear that there is no way that these inflation risks persist -- hence no reason for the BOE to hike.”

Sterling rose 0.8 percent to $1.4336 as of 4:14 p.m. London time, the biggest increase since Dec. 9. It touched $1.4080 Thursday, the lowest since March 2009. The pound gained 1.2 percent to 75.54 pence per euro, climbing for a third day.

The volume of sales including fuel fell 1 percent, the biggest drop since September 2014, the Office for National Statistics said in London on Friday. Economists surveyed by Bloomberg forecast a 0.3 percent decline.

The pound’s gains coincide with a dimmer outlook for Britain’s economy. Crude futures are still close to a 12-year low, dragging down market expectations for consumer-price growth. This has spurred banks to reconsider when the BOE will start raising interest rates.

BNP Paribas SA and Royal Bank of Canada pushed back their forecasts Friday to February 2017. Dominic Bryant, an economist at BNP Paribas, said concern about the outcome of the U.K. referendum on European Union membership also favors the BOE waiting longer.

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