Pound exchange rates rally as UK retail sales rebound sharply

Philip McHugh February 18th 2019 - 2 minute read

The pound rallied against the majority of its peers at the end of last week’s session as UK retail sales surged in January.

Sterling appears to be consolidating these gains at the start of this week, with GBP/EUR muted at €1.1416, GBP/USD flat at $1.2908 and GBP/CAD subdued at C$1.7076, while GBP/AUD and GBP/NZD both hold steady, striking AU$1.8050 and NZ$1.8792 respectively.

Brexit will be back in focus at the start of this week, potentially limiting the appeal of the pound if the EU continues to resist calls to alter the Irish backstop agreement.

What’s been happening?

The pound surged at the end of last week’s session, rallying from a multi-week low on the back of some stronger-than-expected UK retail figures.

According to the Office for National Statistics, UK retail sales rebounded from -0.7% to 1% last month, roaring past expectations of a more modest 0.2% rise as consumers splurged during the January sales.

These gains were then extended late in the session after the Irish Foreign Minister suggested that the EU is still willing to offer a ‘package’ to the UK help get the Brexit withdrawal deal across the finish line. 

Helping to bolster the rally in the GBP/EUR exchange rate on Friday were some comments from the European Central Bank’s Benoît Cœuré as he warned of the possibility of fresh monetary stimulus later in the year.

Meanwhile, the GBP/USD exchange rate shot higher at the end of the week as the US dollar was left on the back foot after US industrial production unexpected contracted in January.

What’s coming up?

Looking ahead, Brexit will return to the spotlight at the start of this week as the UK ramps up efforts to persuade the EU to offer concessions on the Irish backstop.

This could see the pound stumble against its peers today if talks continue to flounder amidst rising concerns that the UK runs the risk of a no-deal Brexit.

Meanwhile, the euro could also be met by some softness today if the ECB’s Andrea Enria echoes Cœuré’s dovish tone in a speech later this afternoon.

Finally, US markets remain closed today for the Presidents Day holiday, limiting the release of any domestic data and likely capping movement in the US dollar.

Written by
Philip McHugh

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