The dollar consolidated its gains against the pound on Friday as it continued to benefit from better-than-expected US retail sales numbers, which raised bets on the strength of the US economy and monetary policy tightening before the end of the year. Retail sales unexpectedly rose last month, data from the US Census Bureau showed on Thursday, increasing 0.7% from July despite expectations of a 0.8% dip. The figures revived expectations that the US Federal Reserve – which holds its two-day policy meeting this week – will taper its asset purchases earlier than previously thought.
US consumer sentiment held steady in early September after sinking to its lowest level in nearly a decade in August. However, consumers remain pessimistic about the outlook amid inflationary pressures, a survey showed on Friday. The University of Michigan Consumer Sentiment Index edged up to 71 in the first half of September from 70.3 in August – the lowest reading in almost ten years. Economists had forecast a reading of 72.
UK retail sales fall unexpectedly
The British pound slipped to the 1.37 mid-range against the dollar on Friday as UK retail sales fell short of expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, the UK currency’s losses were kept in check.
The average price of property coming to market in the UK has hit a record high after rising 0.3% in September to £338,462. This all-time high is just £15 above the previous record set in July, suggesting property prices are becoming more stable, Rightmove’s House Price Index showed over the weekend. Buyers are facing strong competition with demand per property more than double pre-Covid levels.
According to Tim Bannister, Rightmove’s director of property data: “While the holiday-starved took their break over summer, the high ratio of buyer demand to properties for sale means that the property market remains stock-starved despite the summer lull lessening overall activity.”
By this morning, the pound vs dollar rate had slipped lower and was hovering above the 1.37 benchmark.
A quiet start to the week in the economic calendar on both sides of the Atlantic means tomorrow’s Building Permits and Housing Starts figures from the US housing market are the first releases of note.
Both the US Federal Reserve and the Bank of England hold policy meetings this week on Wednesday and Thursday respectively. Investors will pour over the minutes from the respective gatherings of central bank officials for clues surrounding future monetary policy.
The first notable data from the UK economy is published on Thursday when the Markit Manufacturing PMI and Markit Services PMI – both for September – hit the headlines.