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UK retail sales beat expectations in July, offering the Pound a boost ahead of the weekend.
The British Pound rallied in the minutes after the ONS reported that UK retail sales rose 0.6% month-on-month in July, exceeding expectations for 0.3%.
The above-consensus reading suggests the UK consumer continues to keep going, despite rising inflation and growing anxiety about new tax announcements in November's budget.
The monthly advance takes the year-on-year retail sales growth to 1.1%, which was below expectations for 1.3%, but better than a downwardly revised 0.9% reading for June.
The Pound to Euro exchange rate (GBP/EUR) rose to 1.1530 in the wake of the release, while the Pound to Dollar exchange rate (GBP/USD) rose to 1.3465.
Although the retail sales data has given the pound a discernible boost, the reaction is still relatively contained in the context of recent price action. Tuesday saw a massive drop in the pound, and subsequent days of recovery have not yet fully recovered that single-day fall.
"The warm weather in July helped retailers score, but the question is how long can this be sustained. The summer's feel good factor is well and truly over. Looming tax rises and rampant speculation are likely to keep consumers cautious in the run up to the Budget," says Isaac Stell, Investment Manager at Wealth Club.
The retail sales figures are also likely to be held with a degree of suspicion, given that Friday's release was supposed to be issued last month, but was delayed due to errors at the ONS.
The ONS realised there were problems with their dataset and had to readjust their figures for recent months. Markets will want to see a few more of these adjusted reports to be able to start making more accurate comparisons.
Nevertheless, a beat is a beat and comes on the back of months of downbeat and dour UK economic data, which have consipired to weigh on the pound.
Pound Sterling should remain relatively well supported in the coming days, but anxieties about the UK's debt and the November 26 budget mean it will lack the real backing required to drive a decisive rally against the euro, dollar and other major currencies.
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"GBP weakness is in line with our long-standing bearishness on the currency vs EUR for exactly the premise that given its domestic fiscal challenges the currency seems especially vulnerable to a bond market sell-off," says Shahab Jalinoos, Strategist at UBS.