The British pound rebounded Thursday after yesterday’s losses on the back of a local round of positive data, which some say may be enough for an interest-rate hike from the bank of England later in the year.
Yesterday’s inflation figures hit the market below expectations and showed continuing downtrend and led to a tumble in the pound yesterday and may have provided temporary relief for the BoE, which is caught in a tug of war on the question of an interest-rate hike.
That scenario may have been crushed today with the release of retail sales figures, which hit the market at 1.6 percent and was well above expectations for a figure of 0.7 percent and shows the economy may be in better shape than some thought.
The retail sales figures come on the back of recent wage growth numbers, which were also positive and both of these indicators are believed to be the real driving force behind a rate rise.
The BoE may be prepared to overlook declining inflation numbers when they vote to hike rates.
"Looking ahead, with employment still rising at a robust pace, real wages on the up again, and consumer confidence high by past standards, we are upbeat about the outlook for consumer spending,” said Andrew Wishart, UK Economist with Capital Economics.
“Overall, this should help the economy to regain some pace in Q2 and further supports our view that the MPC will press ahead and hike interest rates in August." He added.
A speech by BoE boss Governor Mark Carney is likely to clarify the central banks position on the data released over the past couple of days, which will drive the direction of the pound as we head into the weekend.