Sterling inched up on Tuesday after unexpectedly strong UK retail sales prompted a rebound from early losses, while ongoing concerns about the spread of swine flu kept risk aversion high and limited gains. The pound hit a one-month low versus the yen in early trade but recovered after the Confederation of British Industry's distributive trades survey leapt to +3 in April from -44 in March.
The CBI figure posted the first positive reading in a year and its highest since January 2008. It was much higher than expectations for a -40 reading. While some analysts said the data was distorted by the timing of Easter, it dampened negative sentiment on the currency, which has suffered from a bleak UK economic outlook.
"The CBI survey was certainly strong," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services in London. "We were looking for strength but not this strong. It certainly has been positive for sterling." Market participants said strong demand at a UK gilt auction - the first since the government last week announced that issuance would reach a record high 220 billion pounds in fiscal 2009/2010 - also helped to prop up the pound.
Sterling climbed to a session high $1.4692, pulling away from the day's low of $1.4518. By 1415 GMT, the pair traded at $1.4675, up 0.4 percent on the day. In early trade, the pound hit a one-month low 139.05 yen as escalating worries about the potential for swine flu to spread around the world knocked global shares and prompted buying of the yen and the dollar - considered safer bets in times of uncertainty. Sterling recovered to 141.60 yen by late London trade, up 0.2 percent on the day. The euro was unchanged at 89.00 pence, retreating from a session high 89.70 pence.