By Lucy Raitano
LONDON – Sterling edged up against the dollar on Friday and was set for its first weekly rise in four weeks, as a weaker greenback and better-than-expected retail data allowed investors to look past mounting pressure on British Prime Minister Boris Johnson.
Data on Friday showed retail sales volumes in May fell by 0.5% on the month, a slightly smaller decline than the 0.7% drop expected by economists polled by Reuters.
By 0858 GMT, the pound rose 0.25% against the dollar at $1.2294 and flatlined against the euro at 85.84 pence.
It was not much affected by news that Johnson’s Conservatives had lost two parliamentary seats, a crushing blow to the governing party that prompted the resignation of the party’s chairman.
“The politics is mostly for domestic consumption, we know in theory there can’t be a leadership challenge for the next 12 months, unless they change the rules,” Kenneth Broux, an FX strategist at Societe Generale.
Johnson recently survived an effort to topple him as party leader and according to rules, another confidence vote cannot be held for a year.
Meanwhile, the retail sales decline comes after Thursday’s PMI numbers for June, which showed a composite reading of 53.1, above the median forecast of 52.6.
Broux said a lot of bad news was already “baked in” to sterling which was mostly reacting to dollar weakness caused by traders scaling back where U.S. interest rates may peak.
The currency is up 0.7% on the week to the dollar.
Traders will be watching comments from Bank of England Chief Economist Huw Pill who will make a speech later today, as well as MPC member Jonathan Haskel.
“It’s an extremely difficult balancing act, they have to try to not create a deep downturn while getting inflation under control, that’s going to be very difficult,” said Broux.