HiFX comments on the retail figures

Commentary by Andy Scott, associate director of FX advisory services at foreign currency specialists.

“Sterling jumped by around 1% against both the dollar and the euro on Thursday following the release of retail sales numbers for April, the strongest since November. After a surprise fall in March, consumers were clearly in the mood to spend in April as the warm weather resulted in the strongest clothing sales in four years. Sterling rose to 1.5650 against the dollar and above 1.40 against the euro as the buoyant consumer will help offset some areas of the economy such a manufacturing which slowed last month.

“With the recent uptick in the housing market after a winter lull, and consumer confidence at its highest for several years, there’s good reason to be upbeat about the outlook for consumer spending in the months ahead. Separately, last night’s Federal Reserve’s minutes from their last meeting highlighted concerns over the health of the U.S. economy and all but ruled out the first hike being at their June meeting. They will continue to monitor the data in the months ahead but we continue to favour them to hold off hiking rates this year. As a result of them delaying a rate rise, we expect to see GBP/USD to move back above 1.60 this year. Against the euro, we favour sterling to continue to struggle on any moves above 1.40 and for the euro to strengthen as the euro zone recover continues, pushing GBP/EUR back towards 1.30.”