LONDON: The British pound erased its early losses on Thursday as risk appetite was boosted after US retail sales data topped estimates, although fears of a surge in coronavirus infection rates capped its gains.
The US Commerce Department's report showed retail sales jumped 7.5% last month compared with economists' forecast of 5%, suggesting the economy was continuing to pull out of a coronavirus-driven slump.
Against the dollar, the pound was trading broadly steady after falling as much as 0.5% to 1.2520 earlier in the session after data showed the slide in Britain's jobs market eased in June.
"We still believe going forward the UK faces issues and think the economy will fare worse than others in Europe," said Rony Nehme, chief market analyst at financial research firm Squared Financial. The number of employees on company payrolls fell by 649,000 from March to June, but the largest declines came at the start of the lockdown, the Office for National Statistics said on Thursday. The number of people on payrolls fell by more than 74,400 in June, compared with 124,000 the previous month and April's 450,000 plunge.
With British gross domestic product data for May rising less than expected, investors are questioning whether the fiscal stimulus measures already announced will be enough to prop up the economy. Speculators are shorting the pound. The latest CFTC positioning data showed that leveraged funds held $1.28 billion in shorts, though the amount had declined in recent weeks and was not as high as around the same time last year. The pound also weakened against the euro, falling 0.2% to 90.84 pence after European Central Bank President Christine Lagarde struck a cautious tone on the outlook for the euro zone economy.
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