Year-on-year sales jumped from May’s downwardly revised 2.2 per cent to 3.8 per cent, and excluding fuel annual sales rose by 3.6 percent. The Office for National Statistics (ONS) stated: “All four main sectors contributed positively to the amount spend, and all sectors except food contributed positively to the quantity bought. This resulted in year-on-year contributions of 4.3 and 3.8 percentage points respectively.” The results helped Sterling edge up 0.4% against the dollar despite a hard-hitting fiscal risks report.
The results helped Sterling edge up 0.4 percent against the dollar despite a hard-hitting fiscal risks report.
The report from the Office for Budget Responsibility (OBR) stated that the UK would be dragged into a recession in the case of a no-deal Brexit.
Added to this, the fiscal watchdog warned that business surveys from last month suggest the UK may already be entering a ‘full-blown recession’.
The OBR warns: “Surveys were particularly weak in June, suggesting that the pace of growth is likely to remain weak. This raises the risk that the economy may be entering a full-blown recession.
“The fiscal risks posed by recessions depend on their depth and persistence, the sectors most deeply affected, and the pace at which the economy subsequently recovers.”
The GBP/USD gains were supported by Wednesday’s disappointing data from the Commerce Department, which revealed that US homebuilding slumped for the second consecutive month.
June’s building permits fell to a two-year low, showing the US housing market continued to struggle despite mortgage rates declining.
Further data revealed that housing completions were at a six-month low while there was only a modest increase in the number of homes under construction.
Commenting on the US housing data, Chief Economist at MUFG, Chris Rupkey stated: “Residential housing construction is one of the leading indicators of a recession, and while construction activity isn’t dropping precipitously, housing is stuck in a rut.
“If the Fed thinks rate cuts are going to send housing construction up like a rocket, they better think again.”
Looking ahead to this afternoon, the dollar could recover some losses against the pound following the release of the Philadelphia Fed Manufacturing Survey.
US dollar sentiment could rise if July’s survey shows a rebound following June’s disappointing slump.
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