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Pound Rallies Despite Weak UK Retail Sales as COVID-19 Infection Rate Falls

February 19, 2021 at 14:43 by Simon Mugo

A lot of pound sterling notes of varying valueThe Sterling pound rallied to new highs despite the disappointing UK retail sales data released earlier today that almost derailed its rise, but the bulls prevailed. The GBP/USD currency pair rallied to new 34-month highs driven by the declining UK coronavirus infection rates and optimism about the country’s reopening.
The GBP/USD currency pair rallied from a low of 1.3951 in the Asian session before rallying to a high of 1.4035 in the early American market and was trading near these highs at the time of writing.

The positive market sentiment initially drove the currency pair’s rally in light of the UK’s hugely successful coronavirus vaccine rollout and expected economic reopening. The release of the downbeat UK retail sales data for January had a minimal impact on the pair. According to the Office for National Statistics, the UK’s retail sales shrunk 8.2% in January compared to the expected 2.5% decline. The release of the UK’s public sector net borrowing for January, which was lower than the previous figure, supported the pair’s rally.

The upbeat Markit/CIPS Flash UK Services PMI, which came in at 49.7, beating analysts’ estimates set at 41, drove the pair higher. The upbeat UK services PMI also helped fuel the rally. The speech by Bank of England policymaker Gertjan Vlieghe in favour of negative rates later this year capped the cable’s gains.

The currency pair’s performance over the upcoming weekend is likely to be affected by geopolitical events.

The GBP/USD currency pair was trading at 1.4014 at 14:42 GMT after rallying from a low of 1.3951. The GBP/JPY currency pair was trading at 147.82, having risen from a low of 147.28.

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