UPDATE £ 2 for third consecutive weekly gain against the dollar
* Chart: World exchange rates in 2020 tmsnrt.rs/2egbfVh
* Chart: British pound trade-weighted since the Brexit vote tmsnrt.rs/2hwV9Hv (Update prices, title and lede, add a chart)
LONDON, May 21 (Reuters) – The British pound slipped against a stronger dollar on Friday, but was still on track for weekly gains against the dollar and the euro, helped by the release of strengthening data market expectations for a strong economic recovery in the UK.
A preliminary reading of UK PMI data for May hit an all-time high, with previously closed hotels, restaurants and other customer services recording the biggest jump in demand.
Earlier in the session, separate data showed UK retail sales surged in April. Sales volumes jumped 9.2% month over month, double the average predicted in a Reuters poll of economists.
The British pound did not move substantially on the news, but strengthened throughout the morning session, reaching as high as $ 1.2330 before slipping later as the dollar strengthened. As of 2:46 p.m. GMT, it was down 0.2% on the day to $ 1.4165, set for a weekly gain of around 0.5%.
Against the euro, it rose 0.3% to 85.98 pence per euro, on track for its fourth consecutive weekly gain.
The British pound broke the key level of $ 1.42 on Tuesday for the first time since February, boosted by a combination of dollar weakness and betting on a faster economic recovery in the UK.
Britain took an important step towards easing the lockdown on Monday, lifting the ban on international travel and allowing restaurants to reopen for indoor service.
Neil Jones, head of currency sales at Mizuho, said the economic recovery in the UK was partially built into the pound, but not fully, as there is no clear precedent for the amount of vaccine that will allow the economy to reopen or what will be the impact on GDP. .
Jones expects cable to hit $ 1.45 this summer.
Data released earlier this week showed UK inflation more than doubled in April and UK unemployment fell unexpectedly between January and March.
For currency investors, the key question is whether rising inflation will impact the Bank of England‘s monetary policy, causing it to raise rates earlier.
“PMIs clearly show that cost pressures are increasing and companies feel comfortable passing them on to consumers,” ING economist James Smith wrote in a note to clients.
“We are inclined to say that inflation will gradually tend down from this period next year, thus reducing the immediate pressure on policy makers to consider rate hikes,” he said. added.
Elizabeth Howcroft Report; Edited by Catherine Evans and Andrew Cawthorne