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Sterling gets a boost from good retail sales and low unemployment

By Dan Wilson August 16, 2018 - 6:18 pm

Two developments in the UK economy this week have given pound sterling a bit of a boost but it may be a momentary filip. The July retail report made for encouraging reading. UK retail sales rose by 0.4% during July, up from the -0.5% contraction seen back in June, which was above most analyst expectations. And in other headlines the UK reported the lowest level of British unemployment for 43 years.

Ths has given sterling a boost. So now might be a good time to consider locking in a preferential exchange rate with a forward contract if you have any hefty bills in foreign currencies that need paying any time soon.

But despite some cheer from the July retail figures. Currency watchers weren’t taking too much succour from the increase. There are fears that the July retail numbers are really just a sign that the August figures will be weak again, just like in June:

For now, and unfortunately for sterling, we see little scope for the pound to react positively to too much data at the moment as the conversations around Brexit remain geared towards a no-deal scenario. We expect today’s retail sales numbers to show that the British consumer did its spending earlier in the summer and if there was money to be spent in July, that it was likely borrowed from August’s outgoings given the squeeze on earnings.
– Jeremy Cook, WorldFirst

When it comes to the relative strength of sterling, Brexit is still the elephant in the room. And the negotiations recommence tomorrow (Friday 17th) with the aim of thrashing out a workable draft separation agreement that heads of government can vote on at the October EU Council meeting. If recent rounds of talk are any predictor, then we shall see plenty of turbulence in the currency situation as the talks progress. But at least it means we are not so many weeks away from reaching at least some vague notion of what Brexit might actually look like.

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