The British pound is jumping against the dollar on Thursday after the first official post-Brexit statistics on the UK’s retail sector surprised massively to the upside.
The ONS’ data showed that retail sales jumped 5.9% on a year-on-year basis, up from 4.3% in June, and well above the 4.2% growth that had been forecast by economists.
On a monthly basis, sales grew 1.4% compared to a 0.9% fall in June, and against a forecast of 0.2% growth.
As a result, sterling is bouncing, climbing almost 1% at around 10:00 a.m. BST (5:00 a.m. ET), 30 minutes after the data was released. That puts sterling at $1.3168 against the greenback, up from $1.3060 prior to the release. Here’s how that jump looks on the day:
While it has jumped substantially on the day, sterling is still majorly depressed, sitting at 31-year lows against the dollar. On Monday, the currency hit a three-year low against the euro. Sterling has fallen by almost 14% since the UK voted to leave the European Union in late June. The currency has not been this weak against the dollar since 1985 when Chancellor of the Exchequer Geoffrey Howe let the pound float and the US Fed pushed up the dollar by raising US interest rates above 10% in a drive to stamp out inflation.
Despite Tuesday’s rise, most experts expect more weakness from sterling, with HSBC arguing recently that sterling will fall to $1.10, and reach parity with the euro by the end of 2017. Other predictions about the pound’s medium term outlook range from $1.20 at Goldman Sachs and $1.15 from Deutsche Bank, all the way to $1, a prediction made by former PIMCO executive Mohammed El-Erian.