UK Retail Sales Boost Sterling Exchange Rates
This morning we have seen UK retail sales come out much better than expected and as a result Sterling exchange rates have shot up well over the 1.20 level showing once again just how unpredictable the currency markets can be. The expectation was for retail sales to come in at 0.5% but actually showed a dramatic uplift to 1.7% which is very good news for British retailers and also for the UK economy. The UK high street had suffered of late due to the recent floods which had hampered many businesses and led to a reduction of people spending, which coupled with the annual recovery from the Christmas period led to a significant reduction in sales figures. So, today’s news is a real boost and comes just one day before the latest revision of Gross Domestic Product (GDP) figures which will give possibly the best overview of how the UK economy is performing.
Retail Sales are an important data release as it makes up such a large section of the economy and also provides an insight into how the British public perceive the economy to be performing and more importantly what sort of financial situation they are in. In other words the higher the retail sales figures are the more likely it is we can say that the British public have more desposible income which, when spent, means we see more money flowing through the economy which will only help to stimulate growth. From this mornings data release it could be argued that the economic impact on the floods which hit so much of the UK could be over but I think that we need to see at least one more month of strong retail sales figures to ensure that this month was not just a blip. However, if the impact of the floods is done then there may actually be a positive impact still to be had as the clean up operation and the millions of Pounds that will need to be spent on the effected areas could provide a boost for the construction industry and also the retail sector.
Meanwhile, across the Pond this afternoon there is a raft of economic data due for release with jobless claims, home sales figures and possibly most noteably GDP figures all of which have the propensity to move the USD. The GDP figures are expected to show a strong 2.7% amd any fluctuation from this figure could lead to a lot of volatility however, even if it hits this level it will be seen as very strong for the Dollar. The data is due for release this afternoon at 13:30 GMT.