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Pound continues to fight back

Pound continues to fight back

Yesterday, strong UK retail sales data provided a boost for Sterling, with a headline increase of 1.3% for April against the market expectation of 0.5%. The annual increase also showed strong growth, which came in at 4.3%, well above the 2.5% the market had expected.

The Pound rallied following the data releases, with the trade-weighted index at its strongest level since early February. The fears surrounding a “leave” vote in the EU referendum continued to ease which, along with the retail sales data, helped to push the UK currency to fresh highs against its rivals.

GBPUSD broke through the 1.4600 level yesterday morning, hitting a two week high of 1.4664. Initial US Jobless Claims printed at 278k, down from last week’s claims figure of 294k. And the Conference Board Leading Indicator for April showed significant improvement, printing at 0.6%. The Euro ended the day 0.3% lower against the Dollar, trading around the 1.1196 levels.

The lack of data yesterday from the Euro area meant that the single currency failed to reverse the Sterling gains seen over the last two days. GBPEUR closed yesterday above the key 1.3000 threshold and with no key data due for release today, the Euro will be left to market sentiment.

Interestingly, the European Central Bank (ECB) Monetary Policy Meeting Accounts showed that investment will now be directly into corporate bonds, rather than national ones. This is another attempt to encourage spending in the Euro area to increase inflation. By cutting out one layer of the transmission mechanism, the ECB is hoping that corporations will directly invest the funds so benefits will reach the consumer quicker.

The Pound reached 1.3071 against the Euro yesterday, the best level since early February for Euro buyers.

Data to watch: 7am German April Producer Price Index, year on year, month on month. 10am EUR March Current Account. 2pm US Fed’s Tarullo Speech.

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