The British pound made steady gains overnight and earlier Thursday, in the wake of the Wednesday US Federal Reserve policy meeting and better than expected UK retail sales data. While US rates rose as expected, the central bank kept its outlook unchanged, which hurt dollar sentiment.
By 0945 BST, the British pound was trading at $1.3454. That’s up from $1.3447 just before the retail sales data were released. Cable opened the UK trading session at $1.3437, compared with the $1.3366 level at the UK close, Wednesday.
Retail sales boost
Sterling held onto its gains as the Office for National Statistics (ONS) said retail sales rose by 1.1% on the month, 0.8% on the quarter and 1.6% on the year in November.
Retailers noted that Black Friday events helped support sales volumes. Household goods store sales were particularly strong, rising 2.9%, when compared with October.
“Underlying retail sales growth remained reasonably strong in the last few months,” the ONS said. “Household goods stores had a good November, with a number of businesses saying that Black Friday promotions boosted sales.”
US Fed policy detail disappoints
Sterling’s upward move began late Wednesday.
The US Fed raised the US interest rate by 25 basis points to a range of 1.25% - 1.50%. The central bank said it anticipates a small economic boost from US President Trump’s planned tax cuts. However, it kept its outlook unchanged with three rate hikes forecast for 2018.
“At the moment the U.S. economy is performing well. The growth that we’re seeing, it’s not based on, for example, an unsustainable build-up of debt,” US Fed chair Janet Yellen said. “There is less to lose sleep about now than has been true for quite some time, so I feel good about the economic outlook.”
But, the unchanged outlook for future rate hikes disappointed investors. Some had anticipated the outlook could change to prepare the markets for four hikes over the next 12-month period.