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London - The pound is headed for its first weekly gain versus the euro since mid-July as economic data continue defying post-Brexit expectations for a slowdown.
Sterling has climbed against all of its 31 major peers this week, as data on Friday showed an index of UK consumer confidence rose the most in more than three years this month.
It added to a spate of better-than-expected economic data released in August suggesting that the immediate impact of the country’s decision to leave the European Union is not as bad as many had predicted.
“Sterling has reacted, the outlook certainly isn’t as panicked as people thought it could have been,” Jane Foley, a senior currency strategist at Rabobank International in London, said in reference to recent data.
“Over the medium- and longer-term, there are still significant risks for the UK economy, particularly from investment growth.”
Brexit resilience
The first reports to show the impact of Brexit indicated some resilience in the UK economy. An index of consumer sentiment by YouGov and the Centre for Economics and Business Research jumped to 109.8 from 106.6 in July, which was a three-year low. It followed retail-sales figures and unemployment benefit claims last week that beat economist expectations.
The pound was little changed at 85.57 pence per euro as of 12:22, on course for a 1.3% weekly appreciation. The UK currency was at $1.3195, up 0.9% in the week.
Sterling’s rally may be short-lived, as UK politicians come back from their summer recess and the complexities of trade negotiations with the EU become apparent, according to Foley.
“Sterling is a vulnerable currency,” she said. “We’ve got to very be wary of being over-optimistic. I think we’ve got to keep looking over our shoulders and anticipating that there will still be some negative headwinds resulting from political uncertainty connected with Brexit.”
