Soaring retail sales offer the pound salvation

The pound roared higher on Thursday as some impressive UK retail sales offered a moment of respite in what has otherwise been a bleak week for GBP.

Sterling appears to be consolidating its gains this morning, with GBP/EUR flat at €1.1121, GBP/USD stable at $1.2526 and GBP/CAD subdued at C$1.6322. GBP/AUD and GBP/NZD are both holding steady at AU$1.7727 and NZ$1.8483 respectively.

Closing out this week’s session will be the publication of the latest US consumer confidence figures, which could drive the US dollar lower if sentiment continued to deteriorate this month.

What’s been happening?

Having struck new multi-month lows earlier in the week, the pound was able to mount a recovery yesterday on the back of some surprisingly upbeat UK retail sales figures.

With the ONS reporting that sales growth rocketed up from -0.6% to 1%, GBP investors were willing to make some bullish bets on Sterling on hopes that the strong sales will help the UK economy avoid a contraction in the second quarter.

The euro offered limited resistance against the resurgent pound on Thursday, with the GBP/EUR exchange rate climbing around half a cent as European Central Bank (ECB) stimulus expectations continued to limit the appeal of the single currency.

Meanwhile, trade in the US dollar was mixed yesterday, with USD exchange rates strengthening as the Philadelphia manufacturing index soared past expectations in June, before plummeting in the evening following dovish comments from the Federal Reserve’s John Williams.

What’s coming up?

Looking ahead, the US dollar will be in focus today following the publication of the latest US consumer confidence figures.

Economists forecast that the University of Michigan’s consumer sentiment index is likely to have remained in negative territory this month.

Meanwhile, the UK will publish its borrowing figures for June this morning, potentially offering some support to Sterling if the public deficit narrowed as expected last month.

However any upside in the pound is likely to remain limited in the face of persistent Brexit uncertainty, as the rising risk of a no-deal Brexit continues to haunt the currency.

Finally, the euro may be left to tread water today after German PPI figures published earlier this morning revealed that producer prices fell again last month.

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