Gilts opened lower and Sterling remained on the back foot on Thursday morning ahead of UK Public finances and UK retail sales.The market continues to be concerned about public sector debt so any poor data was expected to see the market react abruptly as investor’s fear the UK government will struggle to meet its target for narrowing the deficit this year.

Gold benefited yesterday as investors flocked to safety. Gold looks set to climb higher and closed yesterday up at $1235.40. Conversely, Brent Crude Oil slumped by 1% to close at $74.40 as uncertainty in the US may signal lower demand.

However, unexpectedly, retail sales actually rose three times faster then had been predicted in July. The Office for National Statistics said retail sales rose 1.1% on the month, the strongest growth since February 2010 and well above analyst forecasts for a 0.4 % rise.

On the year, retail sales rose 1.3 %, again above forecasts of 0.6 %. There was also a sharp improvement in Public Finances mainly driven by strong growth in tax receipts.

The Treasury were quick to react after seeming concerned that this figure would be interpreted as more positive for future budget forecasts and they announced that their figures were still in line with the Office for Budget Responsibility full forecast.

Sterling strengthened off the back of these figures and moved 1% higher against the Dollar and 0.5% against the Euro.