Sterling surged against the US dollar and Japanese yen after better than expected UK retail sales data. British retail sales jumped 1.8 percent in March, beating expectations for a mere 0.4 percent increase. This is the biggest rise in more than a year after falling sharply in February by 0.8 percent.
The strong numbers show that consumer spending is recovering raise chances that the UK economy will show higher growth number for the quarter.
GDPUSD jumped to 1.6116 from 1.6056 within minutes of the data at 08:30 GMT. This is the highest level since 8 November 2011.
The following are some analyst comments:
ROSS WALKER, RBS
“It’s not a bad number, you’ve got volumes growth of 0.8 in Q1 and these expenditure numbers correlate closely with retail services output, but that’s still only 5 percent of GDP.
“It tells us that the consumer-facing side of the economy has had a reasonable Q1, and will reinforce expectations that overall services growth will look OK in Q1, with growth of 0.6 or maybe even 0.7 percent.
“But construction will be a huge drag on Q1 GDP, so I don’t think we’ll get a great reading, but the underlying picture is a bit better.”
PETER DIXON, COMMERZBANK
“Stunningly big number. I think to some extent it was obviously on the one hand a weak reaction to the weak February and also the warm weather and apparently also the ONS is citing the fuel panic as another reason why the figures were up as well.
“All in all this is an outlier which we shouldn’t take too seriously but I think the impact of it will be to mean that Q1 consumer spending will have come in more strongly than we anticipated.
“It might add an extra tenth to the GDP growth rate compared to what we were initially expecting so I think it’s the kind of figure which might be just enough to avoid a double dip in the UK GDP.”