Pound euro AND pound dollar exchange rate on the offensive as UK economy shown to be not as bad as previously thought

Details

Published on Thursday, 16 August 2012 09:19

Written by Will Peters

International Money Transfers at our sister site

Hot on the heels of yesterday's good jobs data we have news that UK retail sales have defied expectations by posting a positive growth figure.

The pound to euro is 0.29 pct higher at 1.2800 while the pound to dollar is 0.15 pct up at 1.5708.

The above figures are rare in the sense that when sterling gains against one currency, it would usually be in decline against the other - a reflection of the risk dynamics that hold the USD to be a safe-haven and the euro to be risk asset.


That sterling is advancing against both indicates that the UK currency is enjoying genuine fundamental strength.

And it's not hard to find the reason why.

Hot on the heels of yesterday's good jobs data we have news that UK retail sales have defied expectations by posting a positive growth figure.

Sales volumes rose 0.3 pct in July to give an annual increase of 2.8 pct. This compares to conensus forecasts for a monthly fall of 0.1pc.

And, the Office for National Statistics revised sales growth in June to 0.8 pct from a previously reported rise of 0.1 pct - a massive revision.

This reduces the overall decline in retail sales in the second quarter to just 0.3 pct versus the previous three months.

That, together with significant upward revisions to second-quarter construction and manufacturing figures, could increase the chance that the originally reported drop in GDP of 0.7 pct will be revised up.

As mentioned the UK unemployment rate provided a welcome surprise yesterday.

Unemployment defied expectations and fell to an eleven-month low of 8.0% in July, thanks to the London Olympics. Meanwhile, there were almost six thousand fewer claimants for jobs benefits.

"In addition to this positive news, the MPC minutes revealed that no members voted for either a rate cut or another round of QE. The minutes make it clear that the latter measure remains very much on the table but the fact that the MPC are taking a hands-off approach for now is to sterling’s benefit," notes Richard Driver at Caxton FX.

Weighing on the euro side of the equation is morning news that Dutch unemployment edged up to 6.5 pct in July from 6.3 pct the previous month, with the number of registered unemployed climbing above 500,000 for the first time since 1996.