Pound Rises After U.K. PMI, Retail Sales Data

(RTTNews) - The British pound strengthened against other major currencies in the European session on Friday, following the release of upbeat U.K. retail sales data for January and flash PMI data for February.

Data from the Office for National Statistics showed that U.K. retail sales growth accelerated the most since May 2024, partly due to higher artwork and antiques sales. Retail sales posted a monthly growth of 1.8 percent in January, following a rise of 0.4 percent in December. This was the strongest growth since May 2024. Sales were expected to climb only 0.2 percent.

On a yearly basis, retail sales growth accelerated to 4.5 percent in January from 1.9 percent in December. Excluding auto fuel, retail sales growth improved to 5.5 percent from 2.5 percent.

Data from S&P Global showed that the U.K. Composite PMI was predicted to fall to 53.4, but it unexpectedly increased to 53.9 from 53.7 in January. Overwhelming output from the industrial sector drove faster expansion in overall company activity.

In contrast to projections and the prior reading of 51.8, the Manufacturing PMI has now reached 52.0.

Data from the ONS also showed that the UK government registered the largest budget surplus on record in January due to higher tax receipts. The public sector surplus rose to GBP 30.4 billion from GBP 14.5 billion in the same period last year.

Meanwhile, current expenditure decreased GBP 0.6 billion to GBP 86.1 billion in January.

In the financial year to January, public sector net borrowing was GBP 112.1 billion, which was GBP 14.6 billion or 11.5 percent less than in the same 10-month period a year ago. Borrowing was estimated at 3.7 percent of gross domestic product in the financial year to January.

The upbeat U.K retail sales should reduce dovish speculation about the monetary policy stance of the Bank of England (BoE). But the U.K. inflation decreased in January, and the state of the labor market worsened over the three months ended in December.

European stocks traded mostly higher and were set for weekly gains on the back of strong corporate earnings and easing AI concerns.

The upside remained capped amid simmering geopolitical tensions after U.S. President Donald Trump set a deadline of 10-15 days for Iran to agree nuclear deal or face "bad things".

Iran warned U.S. bases in the Middle East could be "legitimate targets" if Washington attacks.

British Prime Minister Keir Starmer has reportedly blocked a request from Trump to allow U.S. forces to use U.K. air bases during any pre-emptive attack on Iran, saying it could break international law.

In the European trading today, the British pound rose to 1.3479 against the U.S. dollar and 0.8730 against the euro, from early lows of 1.3435 and 0.8749, respectively. If the pound extends its uptrend, it is likely to find resistance around 1.39 against the greenback and 0.86 against the euro.

Against the Swiss franc and the yen, the pound advanced to a 2-day high of 1.0453 and 209.50 from early lows of 1.0427 and 208.39, respectively. The next possible upside target for the pound is seen around 1.05 against the franc and 214.00 against the yen.

Looking ahead, Canada retail sales data for December, PPI data for January, raw material prices for January, U.S. core PCE price index for December, personal income and spending data for December, new home sales for December, building permits for December, U.S. University of Michigan's consumer sentiment for February and U.S. Baker Hughes oil rig count data are slated for release in the New York session.