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After an initial dip lower following weak UK retail sales data, the pound US dollar exchange rate rallied higher on Thursday. The pair dropped to a low of US$1.2825 before bounding higher to US$1.2888 later in the session. The pair is holding those gains in early trade on Friday.
The pound advanced in the previous session despite disappointing UK retail sales. Data showed that retail sales unexpectedly contracted in October by -0.3%, well short of the 0.2% growth that analysts had been expecting. The weaker monthly data means that on an annual basis, retail sales grew just 2.7%, below the 3.4% expected. Analysts believe political uncertainty impacted consumer behaviour and kept investors from spending last month. The pound remained resilient regardless.
The pound has advanced this week even as data has disappointed. This is down to political speculation. Investors are growing increasingly optimistic that the general election on December 12th UK will help the UK avoid a damaging no deal Brexit.
With political campaigning in full swing, the Conservatives are comfortably ahead in the polls. A strong Conservative win increases the chances of Boris Johnson’s Brexit deal passing quickly through Parliament, ensuring that he UK leaves the EU by 31st January with a deal in place. The possibility of avoiding a no deal Brexit is lifting the pound.
Dollar Cautious Over Fresh Trade Deal Headlines
The dollar slipped in the previous session, with Trump’s impeachment drama and ongoing concerns over US — China trade talk progress behind the slide. Mixed trade headlines across the week have unnerved investors.
The dollar has barely reacted to comments last night from White House that suggested that a trade deal between the US and China was imminent, reviving hopes that the trade deal was ending. Dollar investors are trading cautiously after many false signs of progress in US -Sino trade talks.
Today investors will switch some attention back to the US economic calendar. The dollar could receive a boost from retail sales which are expected to show a 0.2% increase month on month in October, up from a -0.3% contraction in the previous month. The dollar fell sharply last month on the release of very disappointing retail sales figures. A solid reading could help calm concerns that the slowdown in the US manufacturing sector is spilling over into the retail sector.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.28934 USD Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound. Or, if you were looking at it the other way around: 1 USD = 0.77786 GBP In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar. |
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