Sterling rises against the Dollar as UK retail sales jump

Sterling rose against the dollar and euro on Friday thanks to a surprise rise in UK retail sales last month that suggested there's still life in the British consumer. The Office for National Statistics said retail sales rose 0.7 percent last month and by 3.6 percent on the year. Analysts had forecast a monthly fall of 0.1 percent. Bank of England Deputy Governor John Gieve said on Thursday there is a risk Britain could experience a recession similar to that of Japan in the 1990s, though it is not inevitable. "I do believe that short term it is a blip. If unemployment continues to rise rapidly it is unlikely retail sales can sustain this year on year rate," said Naeem Wahid, currency strategist at Bank of Scotland. The GBP/USD is currently trading at $1.4540 as of 8:30am, GMT.

The dollar and the yen fell against the euro on speculation the U.S. government will take larger stakes in domestic banks to shore up the nation’s financial system, helping revive demand for riskier assets. The dollar declined versus the euro, after the Wall Street Journal reported the U.S. may raise its stake in Citigroup Inc., citing unidentified people familiar with the situation. Europe’s single currency against the yen on speculation European Central Bank President Jean-Claude Trichet and other board members will today signal confidence in the euro system. “The Citigroup news is not a bad thing for the dollar if the reported action helps improve its credit-worthiness,” said Minoru Shioiri, senior foreign exchange manager in Tokyo at Mitsubishi UFJ Securities Co., the brokerage unit of Japan’s largest banking group. “Rising U.S. stock futures seem to support this view.”The EUR/USD is currently trading at $1.2915 as of 8:45am, GMT.

The Australian dollar rose for the fourth day as investors sold the U.S. currency on speculation President Barack Obama’s government will increase its ownership of Citigroup. Australia’s dollar strengthened against the yen as Japan’s deteriorating economy prompted investors to sell the low- yielding currency. Citigroup is in talks with federal officials that may increase state ownership of the bank to as much as 40 percent, the Wall Street Journal reported, citing people familiar with the situation it didn’t identify. “We’re in for a fairly aggressive down-move in the U.S. dollar across the board,” said Paul Milton, chief foreign- exchange dealer at Societe Generale Australia Ltd. in Sydney. “I can’t see any reason why the Aussie can’t go back to the 66 U.S. cent-level over the next couple of days on the back of weak dollar sentiment,” he said, referring to the currency by its nickname. The AUD/USD is currently trading at 0.6510 as of 8:55am, GMT.

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