The pound rose against the dollar and the euro on Friday after September’s UK retail sales came in much better than expected.
UK retail sales were expected to fall by 0.3% in September. However, the resilience of the UK consumer has made the economists that make these predictions look a little silly with the actual figure jumping 0.3% month on month.
The upbeat insight into the UK economy helped lift the pound against the dollar and the euro. Indeed, the pound was trading at the highest levels against the euro since 2022 shortly after the data was released.
The reading was at odds with other recent economic data points that have suggested mild weakness in the UK economy. However, retail sales is a major leading indicator of the UK economy so traders were more than happy to buy into the pound and UK-centric stocks in early trade on Friday with the outlook for the UK looking that much better.
“There is little sign in these figures of consumers cutting back ahead of the Autumn Budget. Strong sales of computers, which are traditionally seen as a more discretionary purchase, suggest the UK consumer is in relatively fine fettle. And although food sales were rather weak, weather appears likely to have played a part,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.
“With UK inflation now below the Bank’s 2% target, paving the way for further interest rate cuts, there is a feeling of cautious optimism in the air. Add it all up and it suggests retailers can look forward to the festive period with a degree of confidence.”