Pound Sterling: GBP drops on consumer figures as Bank of England hints of rates rise
BRITISH consumer spending figures have not led to a pound pummelling today but the currency has been slightly hit by below-expectation data from the UK economy.
Bank of England: UK economy has grown since referendum
And the Bank of England has signalled that there will be a "modest" rates rise in the offing.
Bank of England policymaker Michael Saunders said today: "I judge that the current policy stance is clearly accommodative.
"While not prejudging what I or the MPC might decide on monetary policy – a modest rise in rates would still imply that considerable stimulus remains in place, helping to support output and jobs."
1pm: £ = $1.27 to USD / €1.19 EURO / ¥ 139.01
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The Office for National Statistics reported that UK retail sales for March slipped by 1.8%, a figure that was far below the -0.2% forecast by economists.
But the pound has continued its uptrend against both the euro and the dollar after it surged on Tuesday following Prime Minister Theresa May's shock election announcement.
David Lamb, head of dealing at FEXCO Corporate Payments, comments: “For a country whose recovery has been underpinned by cheap credit and abundant consumer spending, the nose-dive in UK retail sales is less an economic warning light than a klaxon.
“A week ago, such dire figures would have sent the Pound into a flat spin.
“So it speaks volumes that sterling has taken the shock with relative stoicism. The Pound’s knee-jerk plunge against the Dollar was quickly corrected as sterling hovered around the levels it has stuck at ever since Tuesday’s surprise election announcement.
“Though the Pound’s rally against the Euro has been flattered by niggling doubts over the French election – which remains too close to call after Thursday night’s shootings in Paris – it also suggests sterling has found a new resilience.
“The markets’ assumption that Britain’s June election will deliver a clear victory for Theresa May and place Brexit negotiations on a firmer footing has shifted attitudes towards the Pound. With bad news already priced in for sterling, this week’s unexpected boost in confidence means it is becoming increasingly able to take such shocks in its stride.”
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