020 7898 0500Yesterday saw sterling gain ground especially against the euro as retails sales figures were better than expected. This was after a week which has seen data and announcements from the UK and elsewhere generate some rapid exchange rate movements.
Tuesday and Wednesday were the busiest of days for UK data releases. The former saw the release of the results of the Bank of England bank stress tests with only one of the eight failing. We also saw a drop in inflation levels, as forecast, due to tumbling oil prices, which allow for cheaper transportation and food costs. The Bank of England’s target inflation rate of 2% will be more likely to be achieved next year rather than in 2014, which is something that they are not ‘too concerned about’.
Average earnings in the UK were reported on Wednesday to be up from 1% to 1.4%. This is seen as a leading indicator for an interest rate rise in the UK – should this continue to be a ‘promising’ figure, we could possibly see a rate rise sooner than later. This was the first time since March that average earnings outstripped inflation. Along with this came the Bank of England minutes, which cautioned that a promising pick-up in wage growth was not enough to raise concerns about the outlook for medium-term inflation.
Better-than-expected retail sales data released on Thursday helped sterling make gains against the euro and US dollar in the morning. Looking to today, we will see public net borrowing data, which was forecasted to have increased.
