The British pound is powering ahead today against its US counterpart as more positive data raises speculation that a rate hike from the Bank of England again this year is a real possibility.
Retails sales figures from the UK released earlier today hit the market at 0.3 percent which was well above expectations for a figure of -2.2 and shows that even though the pound has lost a significant amount of purchasing power due to the uncertainty of Brexit, consumers are not afraid to spend.
The news follows on from yesterday’s inflation release, which also beat consensus coming in at 2.7 percent and is well above the BOE’s comfort zone of 2 percent.
A rate hike from the BOE is now firmly back on the table, which was unthinkable as early as last week
“Just a week ago, the prospect of another interest-rate rise in the U.K. sounded distant. Now with CPI at 2.7%, well over the Bank of England’s 2% target, talk of another rise suddenly sounds less outlandish,” said Jacob Deppe, head of trading at online trading platform Infinox
The Bank of England has many things to consider with regards to lifting interest rates such as the property market which has fallen off the rails this year and some believe any further rate hikes may lead to further falls in the real estate sector and this threat will be enough for the BOE to keep rates on hold for the time being.
"Slowing growth in house prices will strengthen the case for the monetary policy committee to hold back from raising the bank rate again within the next six months," said Samuel Tombs from Pantehon Macroeconomics.