Investing.com - Sterling recovered some of its early morning losses on Wednesday following unexpectedly high retail sales figures for the first half of September.
At 10:54, GBP/USD was 1.3426, down 0.25% on the previous session close.
The Confederation of British Industry (CBI) released its Distributive Trades Survey data for September on Wednesday morning. The survey data is a leading indicator of consumer spending.
The CBI data showed the September retail sales balance of 42, an increase on August -10 and a marked improvement on the consensus reading of 5. The September reading was the highest for two years, defying the squeeze on households.
Retailers and wholesalers surveyed expect the growth to continue into October.
The higher than expected retail sales figure shows that consumer demand is on the rise, despite high inflation and slow wage growth. This will be food for thought for the Bank of England’s Monetary Policy Committee for when they meet in November to decide on interest rates.
Cable had fallen as low as 1.3364 earlier on Wednesday morning, as a result of the dollar rally that followed a speech by the Federal Reserve Chair Janet Yellen on Tuesday evening.
Yellen indicated that monetary policy tightening would go ahead irrespective of data, namely the 2% inflation target. The hawkish leaning comments led investors to believe that a December rate hike is on the cards.
The US Dollar index, which measures the strength of the greenback against a trade-weighted basket of six currencies was up 0.36% to 93.14, the dollar was at a one month high.
US President Donald Trump’s tax reforms also look more likely as the proposal has been amended.
The pound had lost most of Tuesday’s gains against the euro, however following the retail sales figures, it inched higher once again. The single currency is struggling on the back of Angela Merkel’s weakened position and the upcoming controversial referendum for Catalan independence in the region of Catalonia in Spain.
EUR/GBP was down 0.11% to 0.8753. The euro continued its losses against the greenvack. EUR/USD was 1.1752, down 0.35%.
Sterling made gains against the safe haven currencies GBP/JPY was 151.56, an increase of 0.33%, while GBP/CHF was up 0.38% to 1.3075.
The New Zealand dollar picked itself back up from earlier losses during the week. It too faced an inconclusive general election, however it looked up ahead of the Reserve Bank of New Zealand’s rate decision on Wednesday evening. GBP/NZD was down 0.28% to 1.8619.
GBP/AUD was up 0.12% to 1.7087, with GBP/CAD flat as 1.6618.
President of the European Council Donald Tusk commented on Tuesday evening following a meeting with Prime Minister Theresa May in Downing Street that sufficient progress had not yet been made in the Brexit negotiations to move onto the next step.
investors will be watching to see if progress will be made during the fourth round of talks, which began on Monday.