Pound Surges On Strong Retail Sales Data Set

By David Schutz,

THE TAKEAWAY: UK retail sales improve on expectations -> Economic outlook improving but still delicate -> Strong data set bolsters Sterling

UK retail sales rose at the fastest pace in over a year as warm March weather boosted clothing and gardening equipment sales, the UK stats bureau reported today. March sales rose 1.5% on the month versus the expected 0.4% increase, and when compared to March 2011, sales increased 2.8% against the expected 1.3%. Panic caused by rising fuel prices also contributed to the strong showing.

The data added to optimism that the UK economy returned to growth in 2012’s first quarter. UK unemployment dropped for the first time in almost a year to 8.3% on the month, the stats bureau said earlier this week. However, with wages c ontinuing to fall in real terms and firms remaining reluctant to hire , the foundations for a sustainable long-term recovery in retail spending remain shaky.

Meanwhile, the Bank of England continues to juggle growth stimulus against the rising threat of inflation. This week’s hawkish BOE minutes highlighted the inflation issue, and BOE member T ucker recently said CPI may not fall as fast as hoped, and described recent news on inflation as “bad.” The Minutes also said that although global economic recovery is proceeding broadly as expected, concerns out of the Eurozone are now greater if anything.

Today’s retail sales data bolstered the pound against the US Dollar. Cable strengthened to a session high by 1.6116, and Sterling also gained against the Euro and Japanese Yen intraday.
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Original Article: http://www.dailyfx.com/forex/market_alert/2012/04/20/Pound_Surges_on_Strong_Retail_Sales_Data_Set.html