What’s been happening?

Pound Sterling – UK Markets 

The sterling recorded modest gains against the dollar and remained steady against the euro on Thursday. Following June’s 0.5% decline, retail sales in the UK increased by 0.7% on a monthly basis in July to beat the analysts’ estimate of 0.2%. On an annual basis, retail sales growth improved o 3.5% from 2.9%. Assessing today’s data, “Many consumers stayed away from some high street stores in July, but online sales were very strong, supported by several retailers launching promotions. Food sales remained robust as people continued to enjoy the World Cup and the sunshine,” said Ryan Murphy, Office for National Statistics senior statistician.

Meanwhile, assessing the different Brexit scenarios in a report published on Thursday, Fitch Ratings said no-deal was a material possibility and added: “This would substantially disrupt customs, trade and economic activity, with the depth of disruption depending on how quickly a "bare bones" deal could be reached.” According to the publication, their forecast of a 1.7% GDP growth assumes a smooth Brexit and a disruptive divorce could cause them to “substantially” reduce their estimates. “Worsening public finances leading to a rising government debt ratio could also lead to a downgrade of the UK,” Fitch Ratings concluded.   

US Dollar – US Markets

The weekly report published by the U.S. Department of Labor on Thursday revealed that the initial jobless claims fell to 212K from 214K a week ago. Other data showed that building permits rose 1.5% in June compared to the market expectation of 1.4% and housing starts increased 0.9% to miss the analysts’ estimate of 7.4% by a wide margin. On the other hand, the Federal Reserve Bank of Philadelphia announced that the business activity in the region’s manufacturing sector slowed down in August with the headline index falling to 11.9 from 25.7. Although it seemed as if the US Dollar Index was looking to close the day with losses following the mixed macroeconomic data releases, political headlines provided a boost to the dollar. 

According to Bloomberg, while speaking at the White House cabinet meeting, the U.S. Treasury Secretary Steven Mnuchin said that they were preparing to impose new sanctions against Turkey if they didn’t release pastor Brunson. "Turkey ‘hasn’t turned out to be a great friend,” President Trump added.        

Euro – European Markets

According to the monthly report released by the Eurostat, the euro area recorded a €22.5 billion surplus in trade in goods with the rest of the world in June 2018, compared with €25.7 billion in June 2017. On a yearly basis, the euro area (EA19) exports of goods to the rest of the world increased by 5.7%. Even though the shared currency showed some signs of life on the upbeat trade data, it failed to preserve its strength and was virtually unchanged against both the pound and the dollar at the end of the day. 

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Friday and investors will continue to look for fresh Brexit headlines.

US: The University of Michigan’s Consumer Sentiment Index will be the only data featured in the American economic docket on Friday. 

EU: The European Central Bank will release the current account figures for the eurozone. More importantly, the Eurostat will publish the inflation report. Analysts expect the core-CPI to decline 0.5% in July on a monthly basis while forecasting the annual rate steady at 1.1%.