While traders and Brits sit on the edge of their seat, the markets learn that the pound has finally recovered, 48 hours after news broke that it fell to its lowest since 2017.

And as traders managed to earn some profits in placing bets against the pound as it plunged into a black hole, amid jitters about the threat of a no-deal Brexit, stronger-than-expected retail sales numbers have helped the pound to stabilise

According to official data, British retail sales increased unexpectedly by 1% in June, which in comparison to data from June 2018, sales were stronger than all forecasts, resulting in a 3.8% rise. 

Contrary to several economists’ views that the UK economy hit trouble during the second quarter, hopes that the economy is proving otherwise are down to the strong and unexpected retail numbers. 

Both potential prime minister candidates appeared to be pushing towards a no-deal Brexit in case they don’t manage to renegotiate a proposed withdrawal agreement with the European Union – an obvious indicator as to why the sterling hit its biggest low against the dollar in over two years. 

Adam Cole, a strategist at RBC Capital Markets, explained reasons for the pound’s drop:

Whilst GBP’s recent underperformance is mostly related to a rising political risk premium, weak economic data have also played their part.

Following the results of the retail numbers, the pound rose from 0.4% to $1.2485, having traded around $1.2470 beforehand, which helped pull the currency out of the darkness.

Meanwhile, the sterling recovered 0.3% to 90.030 pence against the euro.

Britain is due to leave the European Union on October 31st, hence why traders are panicking that it could depart without trading arrangements with the bloc in place.

Dalia Hilmi
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