Sterling rose against the dollar on Thursday after unexpectedly strong UK retail sales data provided some rare good news on the economy, although the figures did little to alter the overall view that the outlook remained grim. The pound rose to as high as $1.5802, supported also by the euro's gains against the dollar after a fall in US weekly jobless claims added to the view the US economy was gaining traction and prompted some investors to pick up currencies considered to be higher risk.
Data showed UK retail sales rose 0.6 percent in October, defying predictions of a fall. Despite the pick-up in consumer spending, investors are bracing for more signs of weakness in the UK economy and such concerns limited gains in the pound. "The retail sales data is better news but the broader picture still remains that there are significant risks to consumer spending ahead. It's best to take this month's data with a pinch of salt," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
In late London trade, the pound pared gains to trade around $1.5755, up 0.2 percent on the day. Some traders said they had been wrong-footed in expecting demand for sterling following its fall of around 2 percent so far this week. Demand for sterling on breaks below $1.59, seen in recent weeks, had evaporated this week, he said. The euro was up slightly on the day at 85.72 pence, holding above technical support around 85.53 pence, its 200-week moving average.
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