European session review: GBP advances, supported by upbeat UK’s PMIs, retail sales data

GBP appreciated against most of its major rivals in the European session on Friday, supported by a slew of upbeat economic data out of the UK, including PMIs, retail sales and consumer confidence, which reinforced market optimism that the country’s economic recovery is firmly on track.

IHS Markit reported its preliminary estimates showed that the UK’s private sector expanded in May at the fastest pace since records began in January 1998, reflecting strong contributions from both manufacturing and services activity. The headline seasonally adjusted IHS Markit / CIPS Flash UK Composite Output Index increased to 62.0 in May from 60.7 in April, supported by looser pandemic restrictions and high levels of pent-up demand.

Meanwhile, the Office for National Statistics (ONS) announced that Britain’s retail sales surged 9.2% m/m in April after a 5.1% m/m jump in March. This represented the biggest monthly gain since June 2020. Economists had forecast a 4.5% increase. On y/y basis, retail sales climbed by 42.4% after rising 7.2% in March. Economists had expected an increase of 36.8% y/y.

The latest survey from GfK revealed that the UK’s consumer confidence improved by six points to -9 in May. This was the highest reading since March 2020, indicating that consumer confidence has made up all the ground lost to COVID-19. According to the report, the improvement was driven by continued optimism for future personal finances and for the wider UK economy in the next 12 months.