Sterling gets boost from stronger than expected UK data
Thursday, October 21, 2004 9:17:53 AM
afxpress.com
LONDON (AFX) - The pound got a boost from unexpectedly strong UK data, which revived to some extent expectations that the next interest rate move from the Bank of England will be a hike after all
The data has enabled the pound to catch up on rises against the dollar it was not able to make over the past few days, said Adrian Foster at Dresdner Kleinwort Wasserstein
The dollar has been on the decline all week but the pound's gains on the US currency have been limited by weakness in UK economic numbers and speculation that the next move from the central bank will be to cut interest rates
"Sterling had so far underperformed," said Foster
Data out this morning revealed that high street spending rose at its fastest rate since January despite anecdotal and survey evidence suggesting that higher borrowing costs have been taking their toll
The office of National Statistics said retail sales in September increased by 1.0 pct from the previous month, substantially higher than the 0.2 pct rise predicted by analysts, who had been expecting moderate growth in light of recent data
On a year-on-year basis, retail sales were 6.9 pct higher against expectations of a 5.9 pct rise
The numbers put back on radar the prospect of a UK rate hike early next year, said Foster
Philip Shaw, chief economist at Investec Securities agreed, saying the data backs up his prediction that there will be another quarter point hike in the first few months of 2005
"The retail sales data were a major surprise and are at odds with our interpretation of the surveys," he said
Still, analysts said the data is unlikely to alter market perceptions that the BoE will keep the cost of borrowing unchanged in November given the housing market slowdown and weakness in the global economic recovery
At 9.58 am, the pound was at 1.8290 usd from 1.8249 ahead of the data while the euro slipped to 0.6904 stg from 0.6924 stg |
