Sterling strengthened as a result of a combination of factors including the reopening of businesses in April which helped support the pound at the start of the new week. April has been a typically good month for the pound with gains historically occurring in the second half of the month, and this could also be partly the reason. Foreign exchange strategists believe that this could be enough for the pound to continue trading well against the euro, especially with many economic data due to be released this week.
Economists and traders are expecting that this week’s economic releases will be proof that the UK economy is recovering as businesses reopen and the quick vaccination programme continues. With inflation coming out on Wednesday and the PMI survey for April out on Friday, markets are optimistic that the data will support the view that the UK is on track for a quick economic rebound. The PMIs are expected to show that economic activity is increasing as restrictions have been eased.
UK economic rebound
The pound has experienced a solid year, as investors speculated on a quick economic recovery due to growing confidence in the vaccine rollout programme. The UK economic outlook has improved the past few months as the successful vaccination programme supported a strong Sterling. Financial analysts and investors forecast that the UK economy will recover as more people are able to go out and spend money in retail shops. Already, there is an increase in shopping following the three-month lockdown, when on 12th of April non-essential stores reopened.
UK businesses report better than expected sales
With many UK businesses reopening, trading has increased as consumer demand was higher, and the reopening proved to be a success confirming that a strong rebound in the second quarter is possible. The ability of consumers to spend was also due to the government’s important furlough scheme which protected consumer income. From bank transactions to restaurant bookings and shop visits, it was evident that people were eager to spend when businesses reopened on 12th of April. Already, the first three days after the reopening, visits to retail and other shops increased instantly, pointing to a sharper recovery than initially expected.
Consultancy Springboard’s statistics showed that footfall last week across all UK retail shops was 25 per cent lower than in the same week of 2019. However, the gap narrowed by more than half in a single week, reaching the level of trading after two months following the first lockdown. Retail parks was the major driver behind the surge, which was only 2 per cent down when compared with the 2019 level. Diane Wehrle, insights director at Springboard, described the first week of reopening as “an outstanding performance” for the UK retail sector and that with the reopening of indoor hospitality on 17th of May 17, “a further boost” to retail destinations is also to be expected.
Fable Data statistics also showed that spending in pubs and restaurants recovered to 42 per cent and reflected similar numbers in restaurant bookings tracked by Open Table. Government figures on public transport also showed that people were on the move, while vacancies also increased to pre-pandemic levels in April. Such measures showing people’s mobility, shopping and restaurant bookings are increasingly considered crucial indicators of the health of the economy and much more accurate when compared to official economic numbers. These near-real-time indicators reflect a more accurate picture of the economy as economists are hopeful that everything is going as well as could have been hoped.
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