U.K. retail sales rose more than economists forecast in February as tumbling inflation boosted consumer confidence. The volume of sales including auto fuel rose 0.7 percent from January, the Office for National Statistics said in London yesterday. Economists forecast a 0.4 percent increase, according to the median estimate in a Bloomberg News survey. It was the fifth consecutive gain and left sales 5.7 percent higher than a year earlier. Consumer spending is being underpinned by the return of real wage growth for the first time since the financial crisis after a plunge in oil prices. Inflation fell to zero in February. The prices of shop goods as measured by the deflator fell 3.6 percent from a year earlier, the biggest drop since records began in 1996. “If you wanted a demonstration that low food and energy prices are good for consumer spending, then this is it,” said Alan Clarke, an economist at Scotiabank in London. “People are clearly not deferring their spending plans amid deflation speculation — they are spending the windfall. This is good news for growth.” The pound extended gains against the dollar after the report and was trading at $1.4977. This rate has been maintained until we saw dollar strengthen in the afternoon. U.K. stocks were lower after the close yesterday.
EUR/USD fell dramatically to 1.0822 this morning, down from three-week highs of to 1.1049 hit earlier in the week. The euro found support earlier, after data showed that the Gfk German consumer climate index was set to rise to 10.0 in April from a reading of 9.7 the previous month, compared to expectations for an uptick to 9.8. But investors remained cautious as Greece failed in a bid on Wednesday to secure a quick cash payment from the euro zone rescue fund to help stave off potential bankruptcy next month. Athens had appealed for the European Financial Stability Facility to return €1.2 billion it said it had overpaid when it transferred bonds intended for bank recapitalization this month. The Greek government is expected to present a detailed list of proposed reforms to its eurozone partners by next Monday. Market traders state that the pair EUR/USD likely received support at 1.05 its low from Mar. 11 and resistance at 1.14 its high from mid-February.
The dollar turned mostly higher against a basket of other major currencies yesterday, as data showing that the number of people filing unemployment assistance in the U.S. last week fell to a five-week low sparked optimism over the strength of the job market. In a report, the U.S. Department of Labour said the number of individuals filing for initial jobless benefits in the week ending March 21 declined by 9,000 to 282,000 from the previous week’s total of 291,000. Analysts had expected initial jobless claims to fall by 1,000 to 290,000 last week. Another report showed that the U.S. service sector expanded at the fastest rate this month since September. Research group Markit said the preliminary reading of its services purchasing managers index rose to 58.6 from a final reading of 57.1 in February. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.22% to 97.29, off session lows of 96.32.