What’s been happening?

Pound Sterling – UK Markets 

The pound sterling continued to gather strength against both the euro and the dollar on the back of upbeat retails sales data from the UK and retraced some of its gains on Brexit headlines later in the day. On Thursday, the UK Office for National Statistics announced that retail sales rose 0.3% in August following July’s 0.9% growth and beat the market expectation for a 0.2% contraction. Although sales growth eased to 3.3% on a yearly basis from 3.8%, it came in better than the analysts’ estimate of 2.5%. Commenting on the report, “The figures for the month of August were a little more mixed, with food sales falling after strong sales earlier in the summer and clothing sales declining following a strong July, as suggested by clothing retailers. On the other hand, household goods grew strongly,” Office for National Statistics senior statistician Rhian Murphy said. 

While delivering his remarks at a joint press conference with the European Commission President Juncker, at the Salzburg summit, the European Council President Donald Tusk stated that the Chequers’ suggested framework on the economic cooperation was unacceptable. Responding to a question regarding a possible Brexit summit in November, Tusk said that if they didn’t have a clear solution on the Irish border in October, there wouldn’t be a Brexit summit. On the other hand, British Prime Minister Theresa May reiterated that the White Paper was the only serious proposition and there wouldn’t be an agreement without the Irish backstop as she talked to reporters on the sidelines. 

Earlier in the day, Irish Foreign Minister Simon Coveney said that British Prime Minister Theresa May was genuine on the Irish backstop commitment and added that the talks that are required on the issue hadn’t happened yet.

US Dollar – US Markets

The weekly report published by the U.S. Department of Labor on Thursday showed that the advance figure for seasonally adjusted initial jobless claims fell to its lowest level since 1969 at 201,000. Meanwhile, the Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey revealed that the manufacturing sector expanded at a robust pace with the headline diffusion index improving to 22.9 in September from 11.9 in August. “Over 38 percent of the manufacturers reported increases in overall activity this month, while 15 percent reported decreases,” Philly Fed said in its publication. Finally, according to the National Association of Realtors, existing home sales stayed unchanged in August after contracting in the previous four months. 

With the market interest shifting to the pound sterling on Thursday, the US Dollar Index fell to its lowest level in two months at 93.83 and struggled to make a meaningful recovery despite the upbeat data.              

Euro – European Markets

The shared currency rose to its highest level in ten weeks against the dollar on Thursday and stayed relatively resilient against the pound despite the disappointing consumer sentiment data. The European Commission reported that the consumer confidence in the euro area fell to a fresh 15-month low at -2.9 in September and disappointed analysts who were expecting a reading of -2. "In August, the Economic Sentiment Indicator(ESI) decreased slightly in the euro area (by 0.5 points to 111.6), while it remained stable in the EU (at 112.3)," the EC added. In the meantime, during his speech at a conference in New York, the European Central Bank chief economist, Peter Praet, said that the euro area economy was continuing to expand at a rate above its potential and noted that he was confident about the inflation converging with the bank’s inflation target.

What’s coming up? 

UK: The UK’s Office for National Statistics will release the retail sales report on Thursday, which is expected to show a 0.2% monthly decline in sales in August. Markets are unlikely to react to this data as they will stay focused on headlines coming out of the EU leaders summit in Salzburg. 

US: Weekly initial jobless claims, existing home sales, and the Philly Fed Manufacturing Index will be featured in the U.S. economic docket on Thursday.  

EU: The European Commission will publish its Consumer Confidence report for the euro area. The Swiss National Bank is scheduled to announce its interest rate decision and release the monetary policy statement.