Sterling strengthens as retail gains higher than expected

Published: 26 April, 2011

Sterling finished last week strongly, hitting a 16 month high against the US dollar after UK retail sales gained more than had been expected.

Currency rates

EURO/GBP - 1.1310
US$/GBP - 1.6516
CHF/GBP - 1.4496
CAN$/GBP - 1.5731
AUS$/GBP - 1.5408
ZAR/GBP - 11.126
JPY/GBP - 134.99
HKD/GBP - 12.844
NZD/GBP - 2.0589
SEK/GBP - 10.059
US$/EURO - 1.4604

The figures were expected to show a 0.5% drop on the month, but came in showing a 0.2% increase which helped support the pound. Growth concerns still remain though, and Martin Weale (a member of the Bank of England that has been voting for a rate increase since January) said that the 1^st Quarter had been "disappointing". Today we have CBI industrial trend data which are expected to show that the economy is rebalancing towards manufacturing and exports and then GDP data tomorrow.

In the euro zone, the euro suffered slightly last week following concerns over the need to restructure periphery debt and it fell after ECB President Jean-Claude Trichet stated that a strong US dollar is in the interests of the USA - a move seen by some to "talk up" the US dollar and take the pressure off his own overbought currency.

In the USA, the US dollar plummeted against sterling on Friday and is itself set for a potentially busy week. Wednesday sees the Federal Reserve's interest rate decision and post-decision press conference. The Fed is widely expected to announce the scheduled conclusion of "QE2" (the $600bn second round of Quantitative Easing that has been in place) in June. Any divergence from this - i.e. an extension of the programme or even fresh Quantitative Easing could see US dollar weakness.

Elsewhere, silver markets fell in Asian overnight trading and Asian shares pulled back from recent highs ahead of the Federal Reserve's meeting this week. This spread to the gold and crude oil market as traders wait to see whether the Fed will make any sweeping changes to monetary policy.

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