UK Retail Sales Growth Surprises Markets

Data just released indicates that retail sales in the UK for January rose 0.9% in compared with December. This has surprised markets, which were expecting to fall of 0.3% and is likely to improve sentiment towards Sterling. Meanwhile, there is renewed optimism that the second bailout for Greece will sail through. Eurozone leaders are now set to meet on Monday to discuss this. Meanwhile, reports indicate that the ECB is set to swap its Greek bonds holdings with new bonds to ensure that it is not forced to take losses in the Greek debt restructuring.

Pound Sterling – UK Markets

Retail sales in the UK for January rose 0.9% compared to December against expectations of a fall of 0.3%. This has been a pleasant surprise for the market and has boosted the Pound and the Euro against the US Dollar. Earlier in the day, the Pound was trading range bound against the US Dollar and lower against the Euro. A survey by Knight Frank and Markit Economics showed that the UK house price sentiment index dropped sharply for February. Yesterday, the Pound had surged against the US Dollar, after a slew of upbeat US economic data boosted risk sentiment. Additionally, gains in the Pound were boosted by Nationwide Building Society’s UK consumer confidence index climbing to a 5 month high for January.

US Dollar – US Markets

The US Dollar has weakened amid optimism that Greece would soon receive its next aid package. This is after reports indicated that the ECB would swap its Greek bonds for new ones to ensure that it does not take losses in the debt restructuring. The improving economic scenario in the US has spurred optimism that the world’s largest economy would propel global growth. More robust data seen yesterday on unemployment claims and housing starts have added to this optimism. The Federal Reserve Chairman, Ben Bernanke, assured that Fed's easy-money policies will aid financial institutions in the long run by boosting economic growth. Among the key releases slated for today, markets expect US inflation to ease to 2.8% from 3%. Moreover, the Conference Board’s gauge of the US outlook for the next three to six months is expected to register an increase of 0.5% for January after having climbed 0.4% in December.

Euro – European Markets

The Euro is trading higher against the majors amid hopes that an agreement on the Greek deal is in the offing. German officials indicated likely approval of Greek aid, subject to compliance with necessary conditions. Reports indicate that the ECB is set to swap its holdings of Greek bonds with new bonds in a move to avoid losses in a debt restructuring. Market focus has now shifted to the Eurozone leaders meeting to discuss the second bailout for Greece set for Monday. Meanwhile, data just released indicated that German producer price inflation eased for January. Movements in the Euro are likely to be led by expectations surrounding Greece.

Other Currencies – Highlights

The Canadian Dollar has advanced against safe assets; after risk appetite surged on the back of upbeat US economic data and mounting optimism that Greece would eventually receive a rescue package to avoid a default. Additionally, reports showing that Canadian manufacturing sales rose in December for the fifth time in six months further adding to the sentiment. Additionally, crude oil prices climbing to almost a one month high, also favoured the Canadian Dollar. In today’s releases, markets would keep a tab on the consumer price inflation report for January, which is likely to highlight stability in prices. The outcome of the European Finance Ministers’ meeting on Monday would likely set the tone for risk appetite and would be a key influence on the Loonie in the near term.