(Updates prices, adds fresh comment)
By Ritvik Carvalho and Patrick Graham
LONDON, March 23 Sterling hit a one-month high
against the dollar on Thursday, outperforming other major
currencies after stronger than expected UK retail sales data
soothed worries about weakening consumer sentiment.
Sales rose by 1.4 percent in February from January, the
official numbers showed, beating a 0.4 percent increase forecast
from a Reuters poll of economists and ending a streak of three
consecutive monthly declines.
For the three months to February, this was still the biggest
slide for retail sales in nearly seven years as higher fuel
prices eroded shoppers' disposable income and the Office for
National Statistics said the monthly improvement was too little
to offset the drag from previously weak demand.
But added to comments by Bank of England deputy governor Ben
Broadbent, the numbers bolstered speculation that the bank might
be able to raise sterling interest rates at least once in the
next year, driving the pound half a cent higher.
It peaked at $1.2532, its highest since Feb. 24, before
retreating slightly to stay largely unchanged at $1.2526, up 0.3
percent on the day.
It was also 0.5 percent stronger at 86.08 pence per euro.
"They (retail sales) were obviously stronger than expected
which just added to the recently rather positive sentiment
towards the pound," said Commerzbank currency strategist Thu Lan
Nguyen, noting a near two-week rise in the British currency.
"But obviously there are some people questioning the
sustainability of this trend in consumption."
Sterling has lost nearly a fifth of its value since the EU
referendum in June, contributing to a spike in domestic
inflation which has further weighed on previously robust
consumer spending which then propped up the UK economy.
A stream of recent data had suggested British consumer
sentiment waning, as rising prices force Britons to spend less
on non-essential items.
That speaks for continued easy monetary policy. But signs
that the bank will step in to support the pound with both
hawkish talk and potentially a rise in official borrowing costs
have instead dominated the past week's trade in sterling.
Broadbent said on Thursday it was possible that interest
rates could rise, although he also highlighted the strong sense
of caution among investors about the outlook for Britain after
A number of major banks have warned in the past month that
sterling could fall below $1.20 as public jousting with Brussels
on the terms of Britain's departure from the EU gets going after
the launch of talks next month.
"It's worth noting that when we look at the reaction to
retail sales, it's typically inconsistent and short-lived,
mainly because of the actual volatile nature of the underlying
data series," said ING currency strategist Viraj Patel.
"The headline (number) is great, but the actual underlying
story is still weakening ... that's what matters for a
(Reporting by Ritvik Carvalho and Patrick Graham; Editing by
Catherine Evans and David Evans)