Pound Sterling Sees Boost from Strong Data and US Bond Market Developments

The Pound Sterling has received a boost from recent data releases in the UK. Retail sales fell by 0.5% in July, but analysts attribute this decline to timing rather than a change in the underlying trend. Pantheon Macroeconomics and McKinsey both agree that this is a correction of the early summer surge.

GfK consumer confidence jumped to -14 in August from -17 in July, beating expectations of -18. This increase has been dubbed a 'Burnham bounce', but Berenberg attributes it to easing inflation and interest rate anxiety rather than any change in government leadership.

The data releases support the idea that surprisingly strong UK growth will help the Pound avoid a second-half slump. The GBP/EUR is currently at 1.1667, while the GBP/USD has risen by 0.8% to 1.3648 due to developments in the US bond market.

Simon French from Panmure Liberum notes that the current budget deficit for the UK public sector is evolving as expected according to the Office for Budget Responsibility's forecast. He warns, however, that there are concerns about the UK fiscal path and that bond markets expect more borrowing to come.