LONDON: Sterling neared recent multi-year highs against the dollar on Friday following surprisingly strong March retail sales although a downward revision to the previous month's figure quickly brought it down again.
At 0915 GMT the pound was up 0.1 percent on the day at $1.6820, after trading as high as $1.6834 after the data.
That put the currency within sight of the 4 1/2-year high of $1.6842 struck a week ago.
The euro was down 0.1 percent at 82.25 pence.
The retail sales reading suggests the British consumer continues to drive a strong economic recovery, making it likely the Bank of England will raise interest rates early next year, according to the latest market betting.
That gives sterling an interest rate advantage over other currencies such as the dollar and euro, whose central banks are not expected to start lifting borrowing costs from record lows until much later.
"It was a resilient report, notwithstanding the downward revision, is consistent with the positive news on the UK, and although positions are stretched it would be expected to support sterling," said Phyllis Papadavid, senior strategist at BNP Paribas in London.
"The picture in the UK is a very resilient one and is building the case for a normalization of monetary policy. We're not there yet, but to the extent that that's the case, sterling will continue to be a favourite," she said.
Retail sales posted a monthly gain of 0.1 percent in March, compared with economists' forecasts of a 0.4 percent decline.
They rose 4.2 percent on an annual basis, more than the 3.8 percent increase predicted by economists.
There was little reaction in fixed income or interest rates markets, where traders continue to bet that the BoE will raise rates as early as the first quarter of next year.
Preliminary figures next week are expected to show the British economy grew 0.8 percent in the first quarter, according to a consensus poll of economists, and some see growth closer to 1 percent.
"This is not enough to prompt a revision to our 0.9 percent forecast for next week's first estimate of 1Q GDP growth," wrote JP Morgan's UK economist Allan Monks in a note following the retail sales data.
"But it highlights some upside risk."
Comments
Comments are closed for this article.