Sterling firmed in European morning trade as UK retail sales beat expectations, extending a spate of robust economic releases.
November sales rose 0.6 per cent month-on-month, against expectations for just 0.2 per cent, pushing the annual rate up to 6.1 per cent. Coming on top of solid data earlier in the week on the UK labour market and both consumer and producer price inflation, the data will strengthen the view that UK interest rates may not have peaked at 4.75 per cent, aiding sterling.
As such the pound rose 0.3c to $1.9452 against the dollar, not far from last week’s 12-year high of $1.9497. Sterling also rose 0.2p to ?0.6880 against the euro, Y0.1 to Y202.64 against the yen and 0.9 centimes to SFr2.2269 against the Swiss franc.
The Swissie edged lower after the Swiss National Bank left the centre of its main three-month target rate at 0.75 per cent, citing a benign inflation outlook as its rationale for not hiking rates. The SNB also reiterated its commitment to take “appropriate action” should the Swissie strengthen.
The decision saw the Swiss franc lose 0.2 centimes to SFr1.5327 against the euro and Y0.3 to Y90.93 against the yen.
The US dollar was little changed, trading at $1.3389 to the euro and Y104.17 against the yen, after Wednesday’s sell-off in the wake of disappointing portfolio inflows data. Net inflows totalled just $48.1bn in October, the smallest figure for a year and less than the monthly current account deficit of the US, as US investors stepped up their buying of overseas assets.
“The decline in the US dollar to record lows against the euro in October coincided with a rapid acceleration of US investment into foreign securities. US investors expect to reap a windfall in overseas equity positions from a falling dollar. Given the continued decline in the dollar during November and December, it is likely that this pickup in US investment in foreign equities has continued,” said Michael Woolfolk, senior currency strategist at Bank of New York.
“Now we appear to have two things to worry about: the suspension of Asian central bank buying of US Treasuries and the acceleration in US buying of foreign equities. Were both to occur at the same time, the [inflows] would not only fail to cover the US current account deficit, but would risk dropping into negative territory.”/www.news.ft.com/