The pound rose to above 1.29 versus the dollar for the first time since October , which faltered after investors cited a lack of clarity in tax plans unveiled by President Donald Trump’s administration. The positive momentum was also strenghtened by a solid beat in CBI retailing reported sales.
Sterling advanced for a third straight day to test the psychologically significant 1.2900 level against the U.S. currency. Demand from interbank investors triggered stops above
1.2905, according to a trader in Europe who asked not to be identified as the person isn’t authorized to speak publicly. The currency has advanced almost 3 percent since Prime Minister Theresa May announced snap elections earlier this month.
What’s more, some positive news for the pound came from the economic data. U.K. retail sales grew at their fastes annual pace in 19 months in April, according to the CBI, as warm weather encouraged Britons to splurge on their homes and wardrobes. The CBI’s monthly retail index climbed to 38, the highest since September 2015, from 9 in March.
However, CBI seems to be cautious despite a solid beat as it issued a warning that the warm weather might have had an impact on the print. The CBI’s warnings come after statistics office data showed retail sales recorded their largest decline in seven years in the first quarter, boding ill for an economy that relies heavily on consumer spending. Households are being squeezed as stagnating wages fail to keep pace with rising food and fuel costs, the result of the pound’s 13 percent drop since the June vote to leave the European Union.
A break on the GBPUSD is clear and visible. A move towards 1.30 is now the base scenario, but gains could extend even towards 1.34 in the longer-term.