To say the pound has rallied since sinking close to a five-month low against the dollar on Tuesday would be an understatement. By Wednesday afternoon, the UK currency had managed to recover almost all its losses for the week – marching back to the 1.37 level from Tuesday’s low of 1.358. The initial decline in value was largely prompted by a strong dollar amid a risk-on mood in markets, following a global surge in Covid-19 infections. However, the US currency eventually began to soften as concerns about the impact of Covid-19 on the global economic recovery waned, reviving risk sentiment.
The number of Americans making initial filings for unemployment insurance jumped to a two-month high last week. This tempered hopes that the US labour market is set for a strong recovery in the coming months, as the nation contends with a resurgence in Covid infections. However, the Labor Department’s weekly jobless claims report also revealed more people are returning to work – a trend that could be reflected in the influential Non-Farm Payrolls report for July.
Initial jobless claims rose 51,000 to a seasonally adjusted 419,000 for the week ended 16 July – the most claims since mid-May. Economists had forecast 350,000 applications for the period.
UK retail sales boosted by Euro 2020
Confidence amongst British consumers was at its highest level this month since before the Covid-19 pandemic, despite a rise in infections, a survey by the GfK Group revealed on Friday. The market research institute’s monthly consumer confidence index rose to -7 in July from -9 in June – its highest reading since February 2020. The index was last above this level in May 2017. Economists had forecast a rise to -8.
Retail sales increased 0.5% between May and June, with UK shoppers spending more on food as they stayed in to enjoy the Euro 2020 football tournament. Sales rose 9.5% compared with pre-pandemic levels in February last year.
Darren Morgan, from the Office for National Statistics, said sales picked up again following a dip in May: “with the main driver coming from food and drink sales, boosted by football fans across Britain enjoying the Euros”.
The Markit Manufacturing Purchasing Managers’ Index (PMI), and the Markit Services PMI for both the UK and US economies are slated for release today – the reading for the UK’s dominant services sector is sector expected to dip slightly from 62.4 to 62.