British Pound Sterling

pound sterling

"Inflation has slumped, there's 335,000 more people in work and they're spending it" - Alan Clarke at Scotiabank.


 


The pound sterling (Currency:GBP) is the toast of the currency markets - a rare situation indeed.

The pound euro exchange rate has however slipped back after the euro has shot higher after finding an unusual turn of strength.

The pound dollar exchange rate is 0.3 pct higher at 15730 at 14:32 in London.


The pound Aussie dollar pairing is 0.37 pct in the blue at 1.4979. 

The main driver behind sterling is fundamental in nature. The July retail sales reading released this morning printed stronger than expected at +0.3% M/M.

This is more in line with our projections of a stronger reading than consensus.

However, it was a revision to June's data that really got the blood rushing.

Alan Clarke at Scotiabank says:

"At face value the outcome for July was a bit firmer than expected. But it was the massive upward revisions to the previous month that really struck me, and the net result being that year over year retail sales growth is over a percentage point stronger than we previously thought.

"If you look at the trend, it's been sharply higher for the last year and that's no accident. Inflation has slumped, there's 335,000 more people in work and they're spending it.

"Even before these numbers it looked like there would be an upward revision, because of the industrial production data and construction data. Retail sales does correlate with one of the big services components so there's a good chance that all the doom and gloom for Q2 was overdone."

It’s also worth noting that the ONS says that the Olympics didn't appear to have any impact on sales, so we may see some small positive impact from there in the Aug data instead.

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