Forex News: Pound Rises After U.K. Burnham Victory

Pound Rises After U.K. Burnham Victory

(RTTNews) - The British pound strengthened against other major currencies in the European session on Friday, after the release of strong retail sales figure in May and the political stability indicated by Andy Burnham's victory in the Makerfield by-election.

Investors considered the possibility of further political unpredictability with Burnham's return to Westminster in addition to the Bank's policy outlook. Speculation over a possible challenge to Prime Minister Keir Starmer's leadership has increased following Burnham's victory.

Data from the Office for National Statistics showed that the U.K. retail sales rebounded in May as promotions and the hot weather drove consumer spending. Retail sales grew by more-than-expected 1.2 percent on a monthly basis in May, in contrast to April's 1.0 percent fall. Sales were forecast to climb 0.5 percent.

Excluding auto fuel sales, retail sales moved up 1.2 percent after a marginal 0.1 percent drop.

On a yearly basis, growth in retail sales accelerated to 3.2 percent in May from 0.1 percent in April and also came in stronger than forecast of 1.9 percent.

Elsewhere, survey data from the market research group GfK today showed that British consumer confidence remained at low level in June.

The GfK consumer confidence index held steady at -23. Confidence remains subdued and vulnerable to further economic or political uncertainty, GfK consumer insights director Neil Bellamy said.

Meanwhile, data published by the Office for National Statistics showed that the UK budget deficit widened more than officially estimated in May. Public sector net borrowing rose to GBP 23.3 billion from GBP 17.9 billion in the previous month.

The Bank of England's most recent policy decision caused some slight pressure on the pound (GBP). Policymakers decided 7-2 to maintain interest rates at 3.75%, as was generally anticipated.

Policymakers noted that some of the upside risks to inflation have decreased due to lower oil prices and the relaxation of geopolitical tensions, and investors concentrated on the Bank's updated inflation assessment.

As a result, markets concluded that the Bank is under less immediate pressure to tighten monetary policy.

Stronger-than-expected UK labor market statistics earlier in the day helped to minimize sterling's losses.

Despite indications of slower economic development abroad, the labor market remained resilient as the jobless rate unexpectedly dropped and wage growth exceeded projections.

In the European trading today, the pound rose to a 4-day high of 1.0677 against the Swiss franc, from an early low of 1.0625. The pound may test resistance around the 1.07 region.

Against the U.S. dollar and the yen, the pound advanced to 1.3241 and 215.53 from an early near 3-month low of 1.3163 and a 1-month low of 212.47, respectively. If the pound extends its uptrend, it is likely to find resistance around 1.34 against the greenback and 215.00 against the yen.

The pound edged up to 0.8658 against the euro, from an early low of 0.8682. On the upside, 0.85 is seen as the next resistance level for the pound.

Looking ahead, Canada CFIB business barometer for June and Canada retail sales for April are slated for release in the New York session.

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