Pound to Dollar Rate Boosted by UK Retail Sales

The dollar – which rebounded on Thursday evening following the release of the minutes from the Federal Reserve’s April policy meeting – was given a further boost by upbeat jobs data yesterday. The Labor Department reported that the number of US citizens filing new claims for unemployment benefits slipped further below 500,000 last week. The figures indicate that job growth picked up this month, though businesses are still experiencing a shortage of workers. Initial claims for state unemployment benefits dropped to a seasonally adjusted 444,000 for the week ended 14 May – the lowest level since mid-March 2020 – compared to 478,000 during the previous week. Economists had forecast 450,000 applications for the period.

However, claims remain well above the 200,000 to 250,000 range that is widely considered consistent with strong labour market conditions, having peaked at a record 6.149 million in early April last year when the pandemic took hold.

Elsewhere in the US economy, manufacturing activity in the Philadelphia area expanded at a robust pace in May, although it cooled from the decades-high expansion recorded in April. The report released by the Federal Reserve Bank of Philadelphia showed the index for activity in the region came in at 43.

UK retail sales surge as shops reopen

The pound vs dollar rate climbed back above the 1.42 benchmark following the release of upbeat UK data this morning. British retail sales leapt 9.2% in April after non-essential shops reopened as lockdown restrictions were eased further, triggering a bigger increase than economists had forecast. Sales volumes were 42.4% higher than at the same point last year when Britain’s first lockdown dealt a severe blow. Economists had forecast that retail sales would rise by 4.5% in April and 36.8% on the year.

Overnight it was revealed that the morale of British consumers is at its highest level since the start of the pandemic, encouraged by mounting optimism about the economy as lockdown restrictions are eased. The GfK Consumer Confidence Index rallied to -9 in May from -15 the previous month, equalling its reading from March last year before the pandemic hit the country with all its might.

Looking ahead

The influential Markit Services PMI is slated for release from the UK economy this morning and is forecast to display further signs of growth in the sector – the index currently sits at 61 with 50 marking the barrier between contraction and expansion. The Markit Manufacturing PMI is also set to be released this morning.

Meanwhile, the Markit Services and Markit Manufacturing PMIs from the US economy – both of which are firmly in contraction territory – are forecast to slip slightly lower.

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