The Great British public has come to sterling’s aid this morning. Data released at 7am today showed that we were returning to the shops in our droves in January and paying our self-assessed taxes on time. Sterling has had a bounce upwards in response.
To be fair, the boost to sterling has been quite small. The markets are continuing to trade on the more important unemployment and inflation data earlier this week, which all points towards an interest rate cut from the next Bank of England next month.
However, the Bank’s decision isn’t for another month yet and there is plenty more water to flow under the bridge before then – especially with our recent weather.
So, for another week it has been all about the central banks. The US dollar continues to gain strength from the promise of higher interest rates, or at least ones not falling as fast as expected, as highlighted in the latest FOMC minutes from the Federal Reserve. In Europe, rumours of an early exit for ECB president Christine Lagarde have been denied, but as one of the more stable leaders in the bloc, the rumour alone has slightly undermined the euro against the US dollar.
Looking more closely at this morning’s economic picture in the UK, the 1.8% month-on-month increase in retail sales shows what can happens when interest rates come down four times in one year. Standout items highlighted by the ONS included art and antiques, sports supplements and jewellery.
The even better news for the chancellor was the biggest monthly improvement to the public finances in over 30 years. With Rachel Reeves’ Spring Statement coming next month, she looks to have around £10bn more than she expected.
The high-level data continues shortly with the Purchasing Managers Index (PMI) across all the world’s major economies.
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