Sterling rises above $1.30 on strong retail sales report

The pound rose above the $1.30 level for the first time since September on Thursday after data showing that UK retail sales notched up their biggest gain since January 2016 last month.

GBP/USD was up 0.52% to 1.3040 by 08.45 GMT from around 1.2979 earlier.

Retail sales surged 2.3% in April the Office for National Statistics said, handily beating forecasts for a 1% increase and rebounding from a sharp 1.4% drop in March.

Fine weather last month had helped boost high street spending the ONS said.

The upbeat data contrasted with weaker economic reports so far this year, as the steep drop in sterling since last year’s Brexit vote drove up impost costs, leading to rising inflation.

Official figures on Wednesday showed that wage growth has now fallen behind inflation for the first time in two-and-a-half years, underlining concerns over a financial squeeze on consumers.

Sterling was higher against the euro, with EUR/GBP down 0.67% to 0.8546 from around 0.8578 earlier.

Meanwhile, the dollar remained on the defensive as an escalating U.S. political controversy continued to dominate market sentiment.

On Wednesday the Justice Department appointed a former FBI director as special counsel to investigate alleged Russian interference in November’s presidential election, as well as possible collusion by President Donald Trump’s campaign team.

The appointment of a special counsel comes after Trump fired James Comey, his FBI director who was leading a probe into Russia’s role in the election and reports that he attempted to interfere with the judicial process, leading to talk of possible impeachment.

The dollar has been hard hit by fears that the U.S. political system could become engulfed by crisis, preventing lawmakers from pushing through tax or spending reforms.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell as low as 97.28 overnight, its lowest level since November 9, having given up all the gains it had made following the election in November.

The index was last at 97.49, up 0.16% for the day.

The dollar index has now fallen more than 5% from its 14-year high of 103.82 set on January 3, as investors lost faith in the so-called ‘Trump Trade’.

A recent run of disappointing U.S. economic data, including inflation, retail sales and housing starts has also weighed on the dollar, tempering expectations for higher interest rates.