James Smith, Research Analyst at ING, suggests that after a disappointing Christmas run-up, retail sales surged by 2.3% MoM in January (way above expectations of 0.8%), bringing the annual comparison up to 5.2%. Key Quotes “Previously reported figures from the British Retail Consortium were good, with footfall up, but even when taking this into account, these figures were very strong. The large rise was fairly broad based and was led by demand for clothing and computers, helped along by post-Christmas price cuts. Over the past year, rising real wages and more recently, cheaper energy costs, have helped boost consumer confidence and spending. Indeed, as job creation remains strong, this trend looks set to continue over the coming months. Despite this strong data, the focus today will remain firmly on the EU Leader’s Summit in Brussels. If the UK is able to agree a deal, the press is reporting that David Cameron could return to London tonight and announce the referendum date, which will most likely be set to take place on June 23rd. This will essentially mark the formal start of campaigning and with the polls likely to remain tight, we could see a loss of economic momentum over the next couple of quarters as uncertainty prompts firms to temporarily hold off on hiring and investment plans. With headline inflation likely to remain low in the near-term, the Bank of England has room to leave rates unchanged until the Brexit uncertainty subsides. However, if the UK votes to remain in the EU, we think there is a strong chance of a November rate hike given that consumer spending remains strong (as demonstrated by this data) and a weaker sterling is likely to help push up inflation in the medium-term.” For more information, read our latest forex news.