nvestors flocked to the safety of the US Dollar, Japanese Yen and Swiss Franc in recent days amid concerns over Turkey and the looming threat of a global trade war. The latter risks were allayed somewhat on the news that a Chinese delegation will be heading to the US for trade talks, with the market hoping that this could spark a breakthrough in negotiations. While the talks do of course have no guarantee of bearing fruit, currency traders viewed this as a good opportunity to buy those riskier currencies battered by ongoing concerns over a currency crisis in Turkey.

Financial markets ended up mostly overlooking yesterday’s US retail sales figures, despite the data comfortably beating expectations. Sales increased by 0.5% in July after economists pencilled in a 0.1% increase. Meanwhile, US industrial production data fell short of expectations and barely expanded in July, albeit this was made up by a rather large upward revision to the June number.

Football World Cup and warm weather boost UK retail sales

A stronger-than-expected set of UK retail sales data allowed the Pound to eke out some modest yet much needed gains against the US Dollar this morning, lifting the currency back above the 1.27 mark.

Headline retail sales jumped by 0.7% in the month of July versus the 0.2% consensus, reversing the sharp drop from a month previous. The ONS cited the World Cup and recent heatwave for the boom, which ensured that year-on-year sales remained at or above 3% for each of the past three months. This will be welcome news for the Bank of England, suggesting that the UK economy got off to a decent start to the third quarter of the year.

Despite the impressive data, the rally in Sterling quickly ran out of steam. Concerns over Brexit and Turkey remain the main driving force in the UK, and it seems that further losses for the Pound could be on the cards before the week is out.

Turkish Lira rebounds from record low level

Elsewhere in the currency markets, the Turkish Lira rebounded further on Thursday morning from its recent violent sell-off. The currency regained a remarkable 16% since reaching an all-time low last week ahead of a presentation from the Finance Minister Berat Albayrak to investors, albeit the currency still remains comfortably lower for the month. We think the Lira remains susceptible to additional losses and more wild swings in the currency look very likely at this stage.