Pound has climbed to a ten-week high and was trading at $1.3278 against the dollar by afternoon today amid forecast-beating UK retail sales data and growing optimism on a Brexit deal.
British retail sales jumped 3.3 per cent in August compared with the same month a year earlier.
Kathleen Brooks, Research Director, at Capital Index, however, told media: “At this stage, Brexit is a binary outcome: there is a deal or there isn’t. This is why it remains such a risk event for the pound. Right now the better economic data has boosted the chances of another rate hike from the Bank of England [BoE] in February next year to more than 30%, a 10% jump in probability in a week.
“This has undoubtedly supported the pound’s recent rally. However, signs that the EU won’t give Theresa May what she wants could see a dramatic lowering in future rate hike expectations, as it is very unlikely that the BoE will hike rates if a ‘no deal Brexit’ is likely.”