The British pound rebounded on Friday from a sharp fall on Thursday, thanks to strong retail sales data as well as business surveys that showed a positive tendency. The country’s economy might already be recovering from its worst annual contraction in 300 years.
The country’s retail sales jumped in March as customers prepared for a partial lifting of restrictions. Also, the official data showed record peacetime government borrowing. Sales volumes rose 5.4% in March from February according to the Office for National Statistics.
On top of strong retail sales, a survey showed a deluge of orders swept through the local companies in April, as the country removed some of the restrictions, pointing to a rapid rebound for the pandemic-hit economy.
The preliminary “flash” reading of the U.K. Composite Purchasing Managers Index (PMI) reached 60.0 in April from 56.4 in March. Its best result since November 2013.
Pound and the country’s economy
After suffering losses on Thursday, the pound was once again set for a weekly gain on Friday. The pound traded 0.3% higher on the day at $1.3878 by 10:55 GMT.
Against the euro, the pound was flat at 86.86 pence, above its lowest levels in almost a week.
The strong PMI data is more visible in the foreign exchange markets where both the pound and the euro are capitalizing on the weaker U.S. dollar. Better than expected retail sales data also helped to boost the pound.
There was other bright news as well. The country’s consumer sentiment rose to its highest point since the start of the pandemic. This information came from a closely watched survey that was released on Friday. Despite this result, the consumer sentiment failed to meet the expectations of economists.
British manufacturer’s hopes for an economic recovery reached their strongest point in 48 years this month. It is logical as the world’s one of the largest economies began to recover.
There has been little focus on downside risks like the loss of the pound vaccine advantage in recent weeks. Another risk factor is the May 6 Scottish elections. Moreover, there is a potential for a renewed weakness of global risk sentiment in May and June due to a renewed spike in UST yields on the back of strong U.S. data. This suggests the risks for the pound/dollar are on the downside in the next several weeks.