UK consumers more confident despite inflation concerns

Sterling on its best weekly value against the euro since the UK went into initial lockdown. The pound rallied against the euro to pre-pandemic levels this week and hit an 11-month high against the dollar.

Economic data this week, including UK inflation and employment figures, had already reinforced expectations the BoE may raise interest rates after Governor Andrew Bailey surprised the market by shelving them at the November meeting.

The BoE is expected to be the first major central bank since the beginning of the pandemic to raise interest rates to rein in inflation, which has reached a ten-year high, owing to rising household energy costs.

A number of issues have been cleared of Bank of England concerns about the risks of tightening monetary policy, and data showed the UK labour market was poised to weather the end of a major government programme.

'October retail sales are the latest piece of evidence to support a BoE rate hike,' ING said, adding that the focus will now be on BoE Chief economist Huw Pill' s statement later in the day.

With the sterling strengthening, concerns are mounting that disagreements between Britain and the European Union are likely to precipitate disruption to trade that could hit the British economy, which has been lagging behind other wealthy nations in the UK