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Pound continues to out perform

The pound rose today despite Britain’s military intervention in Syria, as investors focused on data that could help shore up expectations of a May interest rate hike.

Britain struck Syria with cruise missiles on Saturday in partnership with Western allies, targeting chemical weapons facilities.

Sterling rose, continuing a two-week rally against the dollar that on Friday saw the pound push towards a new post-Brexit referendum high.

Data on British unemployment, wages, and inflation numbers are due this week. These numbers will be key to determine the trend for the pound.

Despite potential snow-related disruption on economic activity in Q1, we still expect the Bank of England to raise interest rates at its May meeting.

US retail sales figures for March will be an important gauge on whether the soft patch we have seen so far this year will begin to subside.

Overall consumer spending growth was very strong in Q4, driven by the post-hurricane recovery and strong fundamentals. The more recent weakness in retail sales is likely to be temporary, given low unemployment and a gradual rise in wage growth.

Other US data releases today include the NY Fed Empire manufacturing and the NAHB housing market reports for April.

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