The pound pushed higher versus the US dollar for a third straight session on Thursday. The pound US dollar exchange rate rallied to a high of US$1.3083 before easing slightly to close up 0.3% on the day at US$1.3075.
The pound advanced on Thursday despite fears of an imminent interest rate cut by the Bank of England. Data this week has been dismal with inflation unexpectedly dropping to a three-year low and UK GDP showing the economy unexpectedly contracted -0.3% in November. Muted inflation, well below the BoE 2% target and sluggish economic growth is a recipe for a rate cut.
BoE policy makers have also been sounding increasingly dovish this week. If UK economic data doesn’t pick up in the coming two weeks, then the BoE are likely to cut the interest rate from 0.75% to 0.5%. on 30th January.
Today, in the absence of any Brexit headlines, pound investors will remain focused on the UK economic calendar with the release of UK retail sales. Analysts are expecting a bumper reading because the data will include the Black Friday / Cyber Monday weekend. Retail sales have been on a downward trend, falling for the past 4 months. Today’s reading is expected to be a one off at 0.6% month on month growth, compared to the -0.6% decline in November.
US Retail Sales Climb Again In December
The US dollar traded broadly higher versus its peers in the previous session, just below the pound. The dollar gained, reversing losses from earlier in the week, as multiple data releases painted a positive picture of the US economy.
US retail sales increased for a third straight month in December, up 0.3% month on month. Core retail sales, which strips out more volatile items, was up a better than expected 0.5%. Solid job creation, 2.9% wage growth and consumer confidence at the highest level since May, meant that households spent well across December. Strong retail sales are an encouraging sign for the US consumer driven economy.
Today data will remain under the spotlight with the release of US industrial production, housing starts and consumer confidence data.
| 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. |
