- Sterling rises to two-week high versus dollar after data
- Currency also benefiting from weaker greenback on Fed minutes
The pound rose to a two-week high on an unexpected surge in U.K. retail sales in the month after the nation voted to leave the European Union.
Sterling climbed versus all of its Group-of-10 peers after the report from the Office for National Statistics suggested the hot summer is outweighing longer-term concerns over the U.K.’s fortunes outside the world’s biggest trading bloc. The July sales figures follow other post-Brexit numbers that have beaten analyst expectations this week, helping to boost the pound.
Inflation, unemployment claims, and now retail-sales figures, show a U.K. economy that’s outperforming expectations despite pre-referendum concerns that an EU exit would cause a slowdown.
“There’s a lot of volatility in sales but, looking through that, retail sales appear very resilient for now,” said Roberto Mialich, a senior foreign-exchange strategist at UniCredit SpA in Milan. “The positive number favored a test toward $1.31, but I think probably we’ll see some reversal.”
The more optimistic view of how the country is faring may not be filtering through to bearish investors, who expect further action by the Bank of England to cap any long-term pound strength. Futures pricing shows the chance of a rate cut by the end of the year at 33 percent.
The pound rose 0.9 percent to $1.3161 as of 4:15 p.m. London time, after touching the highest since Aug. 5. It appreciated 0.6 percent to 86.10 pence per euro, having reached 87.25 on Aug. 16, the weakest level in three years.
Sterling also benefited from general weakness in the dollar, after minutes released Wednesday of the Federal Reserve’s latest meeting damped prospects of an imminent U.S. interest-rate increase.
UniCredit’s Mialich cited BOE monetary easing and an anticipated deterioration of the economy as reasons the U.K. currency will fall.