The British pound broke through the $1.30 mark today, its highest level in 8 months and some believe that now the physiological barrier has been broken, we may see further gains.
At 8.26pm (GMT) the British currency was trading at $1.2940 after reaching a high of $1.3048 earlier in the trading session.
The catalyst in the rise for the sterling, was the release of the latest retail sales figures, which hit the market at 2.3 percent, well above analysts’ expectations for a figure of 1 percent and marks a sharp rebound from last month’s number of -1.4 percent.
The news sent the pound soring and goes some way to alleviate fears consumers are tightening their belts after yesterday’s wage growth numbers which disappointed the market.
“The theory went that squeezed household budgets would likely hit retailers in the pocket too. But in fact the figures beat expectations handsomely, with sales in April 2.3 per cent higher than in March and growing 4 per cent year-on-year,” noted Ben Brettell, senior economist at Hargreaves Lansdown.
“April’s figures were always expected to be better than March, because of the timing of the Easter holiday, but economists had forecast a smaller rebound of 1 per cent, and much more subdued annual growth of 2 per cent,” he added.
In the run up to the elections in the UK where British Prime Minister Theresa May and her Conservative party are Cleary the favorites, we may see the pound jump higher as history has shown when the conservative party leads in the polls.
“Sterling tends to put in an improved performance when the Conservative party does relatively well in opinion polls,” noted Simon Derrick of BNY Mellon bank.
Mr Derick also noted that historically, the pound tended to be unpredictable after the elections and investors may need to be cautious.
“Sterling’s performance in the run-up to an election doesn’t reflect what happens to it afterwards,” he said.