UK retail sales outperformed forecasts in July, giving the Pound a lift heading into the weekend.
Sterling jumped shortly after the Office for National Statistics (ONS) reported a 0.6% month-on-month increase in retail sales in July, well above the forecast 0.3%.
The stronger-than-expected figures indicate that UK consumers remain resilient, despite rising inflation and concerns over potential tax measures in November’s budget, Pound Sterling Love reports.
The monthly increase brings UK retail sales growth over the year to 1.1%, slightly below the 1.3% forecast but above June’s downwardly revised 0.9%.
Following the release, the Pound rose to 1.1530 against the Euro and 1.3465 against the Dollar.
While the retail sales data provided a noticeable lift for the Pound, the reaction remains modest compared with recent movements. A sharp drop earlier in the week on Tuesday has yet to be fully recovered despite the subsequent gains.
The retail sales data may be viewed with some caution, as Friday’s release was originally scheduled for last month but delayed due to errors at the ONS.
The agency discovered issues with its dataset and had to revise figures for recent months. Markets will likely want to see several more of these adjusted reports before making reliable comparisons.
Looking ahead, Sterling is expected to stay relatively supported in the coming days, but concerns over the UK’s debt and the 26th November budget limit the currency’s potential to mount a strong, sustained rally against the Euro, Dollar, and other major currencies.
The Pound’s recent weakness reflects a long-standing bearish outlook against the Euro, as the UK’s domestic fiscal challenges make the currency particularly vulnerable to a potential bond market sell-off.