The Pound has hit its highest level for two-weeks against the Euro after UK retail sales for July showed a surprise increase.
The UK economy has been shrinking since the end of 2011 thanks to the impact of the Eurozone debt crisis, a slowdown of global trade and government austerity policies. Today’s retail figures took many economists by surprise as data released by the Office of national statistics has painted a pretty grim picture for the economy. Some are calling for the last GDP figures of minus 3% to be revised upwards in light of the improving jobs situation and retail sales increase.
Retail sales volume increased by 0.3% month-on-month to give an annual increase of 2.8%. That compares to economists’ forecasts for a monthly fall of 0.1%.
Alan Clarke, an economist at Scotiabank said; “If you look at the (retail) trend, it’s been sharply higher for the last year and that’s no accident,” “Inflation has slumped, there’s 335,000 more people in work and they’re spending it. Retail sales do correlate with one of the big services components, so there’s a good chance that all the doom and gloom for Q2 was overdone.”
Today’s data could be a sign that the UK slump may not be as bad as previously thought. The ONS has been criticised before for posting data that doesn’t correlate with independent surveyors and such confusion makes it difficult for anyone to get a clear picture on the true state of the country’s economy.
In the markets the Pound has made gains against all of its major peers and is expected to ride the wave of optimism to at least the end of the week. Concerns over Europe and a quiet period for the markets could see the Pound make relatively small movements. The Euro is not expected to make any major moves until September when the European Bank is expected to begin its plan to ease the debt crisis.
The Pound to Euro exchange rate is currently trading at 1.274
The Pound to US Dollar exchange rate is currently trading at 1.573
The Pound to Australian Dollar exchange rate is currently trading at 1.498
The Euro to US Dollar exchange rate is currently trading at 1.233
The Euro to Pound exchange rate is currently trading at 0.784
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