By Ritvik Carvalho
LONDON (Reuters) - Sterling rebounded on Friday from a sharp fall on Thursday after strong retail sales data which showed Britain's economy might already be recovering from its worst annual contraction in 300 years.
The pound fell erased its weekly gains against the dollar on Thursday, but was back in the black on Thursday, trading 0.3% higher on the day at $1.3879 by 0821 GMT.
British retail sales rocketed last month as consumers prepared for a partial lifting of coronavirus lockdown restrictions, according to official data which also showed record peacetime government borrowing.
Sales volumes leapt by 5.4% in March from February, the Office for National Statistics said, with clothing stores benefiting especially. Economists polled by Reuters had expected a month-on-month increase of 1.5%.
"Much better than expected March UK retail sales have just been released and position the UK and GBP well for a strong second quarter," said strategists at ING in a research note.
British consumer sentiment rose to its highest since the start of the COVID pandemic this month as the economy reopened partially, a closely watched survey showed on Friday, but the increase was smaller than economists had expected.
The GfK Consumer Confidence Index increased to -15 in April from -16 in March, its highest since a survey conducted in early March last year, before the country went into lockdown.
"We think this data represents further evidence of a return to normality as UK lockdown restrictions are eased, a process that we expect to have accelerated in April, as non-essential retail outlets were allowed to open (though we note that today’s GfK consumer confidence data implied a smaller than expected gain in sentiment to -15 in April from -16 in March)," said Paul Jackson, Global Head of Asset Allocation Research at Invesco, commenting on the retail sales figure.
Flash readings of purchasing managers indexes for Britain due at 0830 GMT will provide a further read on how British industry is faring as the economy reopens.
British manufacturers' hopes for an economic rebound rose to their strongest in 48 years this month as the country began to recover from the slump caused by the COVID-19 pandemic, the Confederation of British Industry said on Thursday.
Against the euro, sterling was 0.1% higher at 86.77 pence. Sterling fell to its lowest in almost a week against single currency on Thursday.