MW: Pound hits 2-week high after U.K. retail sales dispel Brexit fears
The pound strengthened sharply on Thursday after sales at U.K. retailers were much stronger than expected, helping to ease fears that the U.K.’s vote to leave the European Union would precipitate a sharp economic downturn.
Sterling GBPUSD, +0.7744% traded as high as $1.3156 in recent trade—its strongest level in two weeks—up from $1.3042 late Wednesday in New York. Against the euro, the pound GBPEUR, +0.6062% rallied to €1.1624, compared with €1.1552 on Wednesday.
Sales at U.K. retailers rose 1.4% in July, easily beating forecasts for a 0.2% rise. The data added to evidence that consumer spending has remained robust since the vote, even as business investment has fallen somewhat.
Investors are “enticed towards purchasing the pound following another indication that the EU referendum outcome is not having a negative impact on the U.K. economy,” said Jameel Ahmad, market analyst at FXTM, in a note.
“This of course is in contradiction to previous PMI releases in the lead up to the referendum and a preliminary GDP report suggested the U.K. economy contracted last month,” Ahmad added. “Onlookers should keep in mind that it will take time to truly access how the U.K. economy is performing on a consistent basis following the historic vote.”
In other currencies, the dollar remained under pressure after the minutes from the Federal Reserve’s July 26-27 policy meeting, released Wednesday, showed members of the Federal Open Market Committee were split on the timing of an interest-rate increase. The minutes suggested a rate increase is a possibility as early as September, but that the Fed won’t commit to moving until a stronger consensus can be reached about the outlook for growth, hiring and inflation.
That dampened sentiment for some investors who were anticipating a more hawkish signal, especially after remarks from Fed officials earlier this week flagging the possibility of a rate increase in September.
“I think what the trading action is telling us is people still aren’t convinced about September, and there’s still a 50-50 for December,” said Colin Cieszynski, chief market strategist at CMC Markets.
Read: Chart watchers say the dollar is on the verge of unraveling
Against the yen, the greenback USDJPY, +0.13% fell to as low as ¥99.635 earlier in the session, just above its lowest level since the U.K.’s decision to leave the European Union in late June. The U.S. currency rose back above the ¥100 threshold, supported by strong readings on weekly jobless claims, and the Philly Fed index. It changed hands at ¥100.39, compared with ¥100.28 late Wednesday in New York.
The ICE dollar index DXY, -0.28% was down 0.2% at 94.4820.
Also read: Here’s an interesting theory about why the dollar is dropping
In other currency trading, the euro EURUSD, +0.1949% briefly hit $1.1340, its highest level since the day after the Brexit vote, amid a broader dollar selling. The shared currency traded at $1.1298 late Wednesday.
