Positive UK macroeconomic data countered the effects of the ongoing Brexit talks impasse between London and Brussels to send the pound higher versus the dollar on Tuesday (10 October).
At 3:37pm BST, the British currency was up 0.40% versus the dollar changing hands at $1.3194, thereby recovering some of the ground it lost last week in the wake of Prime Minister Theresa May’s political woes and the increasingly entrenched positions of her Government and the European Union on the subject of the UK’s divorce bill upon leaving the EU.
A raft of strong economic data aided the pound intraday. Earlier in the session, figures from the Office for National Statistics showed industrial production was 0.2% higher in August from the previous month, while construction rose 0.6% during the same period.
Meanwhile, the British Retail Consortium noted that same-store retail sales were up 1.9% in September on the same month last year.
Fawad Razaqzada, technical analyst at Forex.com, said the pound’s stormy rise comes after a sharp drop at the end of last week. “At this stage, one has to take this latest rebound with a pinch of salt, as it could be a counter trend move which could ultimately fail to sustain itself.
However, the positive data has again boosted expectations for a rate increase from the Bank of England.
“There are no more UK economic data scheduled for release this week, so any further data-driven moves in the cable may be prompted by US data, with CPI and retail sales on Friday being the most obvious trigger.
Only a potential break back above $1.3250 would be deemed bullish at this stage.”
Meanwhile, market sentiment in the wake of positive data also enabled the pound to cut its losses against euro; down 0.13% to €1.1176, with the eurozone currency battling its own negativity over the political situation in Spain, and many fearing Catalonia might be about to declare independence from Madrid, much to the chagrin of the Spanish government.
The pound was also broadly flat against the Swiss franc and Canadian dollar changing hands at CHF1.2861 and CAD$1.6492 respectively.
Mihir Kapadia, founder of Sun Global Investments, said cautious intraday optimism was merited. “The pound has endured a rough few weeks, especially in response to the political chaos in the country.
But with reports emerging of a cabinet reshuffle, Prime Minister May could use this opportunity to exert her leadership. We expect the currency to react positively to this.” – IBTimes
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