The day after we discovered we are all getting poorer, UK retail sales smashed forecasts. The markets had been expecting a 0.2% decline in August, but they actually increased by 0.3%. However, it is perhaps telling that the figures were largely brought about by a strong increase in sales of household goods and other non-food items. Sales of food and clothing both dropped, which could, however, be a sign that British consumers are beginning to feel the pinch.
Sterling pushed through the $1.32 barrier once more following the release and it also climbed higher against the euro. Opinion is divided on what the strong retail sales show, with some suggesting the splurge won’t last, while others believe it points to a robust economy. As with all things like this, we will have to look at future figures to really get a sense of what the evidence is showing us.
Having said this, the positive data, as well as higher inflation, means that it is now entirely possible that the Bank of England could hike interest rates again before the year is out. The central bank has a target inflation rate of 2% and will perhaps feel steps must be taken to bring it under control if it continues to increase.
On Wednesday night, Theresa May told EU leaders that she won’t delay Brexit, despite the fact that no deal has been agreed and there is still much to be negotiated. She said that extending or delaying the negotiations is not an option, without explaining why. The following day, the French President Emmanuel Macron urged other EU leaders to stand firm against May, calling for them to resist the UK Prime Minister’s request for compromise.
In the US, the Dow Jones industrial average hit an all-time high, with technology stocks driving the index higher. The recent weakness of the dollar is helping to push shares up, as is optimism surrounding the US-China trade war – yesterday, Beijing said that talks, not tariffs, were the solution.
However, it’s hard to know whether the US and China really will be scaling down the rhetoric – and the actions. Make sure to protect your money against moving exchange rates with a forward contract. Speak to your Personal Trader on 020 7898 0541 to find out more.
