Britain’s Retail Sales Grow Last Month
Today’s data has shown an improvement in Britain’s retail sales for November. This has strengthened market speculation that domestic spending is improving, especially after yesterday’s labour market report showed that wage growth grew at a stronger than expected pace. Against this backdrop, traders will eye tomorrow’s GfK survey to better understand consumer morale in the UK for the fourth quarter.
Across the Atlantic, the US Dollar moved sharply higher yesterday after the Fed dropped the “considerable time” language from its policy statement and provided an encouraging assessment of the economy. Traders will now eye economic data in the US going forward to verify if the Fed remains on its path to raise the key interest rate next year.
Pound Sterling – UK Markets
Data just released revealed that UK retail sales improved more than expected for November as robust Black Friday sales last month along with lower fuel prices kept domestic spending supported. The Pound is trading firmer against the majors following the release of today’s data. Going forward, traders will eye tomorrow’s GfK consumer confidence survey for December to gain a better insight into the domestic spending pattern, especially after the nation’s economic growth gained little support from consumer spending in the past few quarters.
Yesterday, Sterling showed little reaction to the mixed labour market report. Data showed that wage earnings growth in the UK outpaced October’s inflation rate but the number of job additions in Britain’s economy were less than expected for the three months to October. Separately, the minutes of the most recent BoE policy meeting indicated that falling oil prices and rising wages are likely to keep household spending in the UK supported going forward. However, Sterling lost ground against the greenback in the latter half of the trading session after the US Fed’s post-meeting statement was slightly hawkish.
US Dollar – US Markets
The greenback gained major ground against its key peers yesterday after the US Fed concluded its two day policy meeting and removed the “considerable time” language from the post-meeting statement. However, the Fed retained its cautious approach by indicating that it would be patient on the timing of an interest rate rise in the US, shifting the onus on to the domestic macro data going forward. Nevertheless, yesterday’s statement was still perceived as hawkish and fuelled speculation that the US Fed is on a path to raise its key interest rate next year. Additionally, the US FOMC upgraded its 2014 economic growth outlook and stated that it expects the US economy to grow in the range of 2.3% to 2.5%, up from its September growth estimate of 1.8% to 2.3%. However, US policymakers lowered the inflation outlook for 2015 which raised some concerns among investors, especially after yesterday’s US consumer price inflation numbers surprised traders on the downside.
Going forward, investors in the US Dollar are likely to remain on their toes ahead of the Markit preliminary services PMI reading for December and the weekly jobless claims report scheduled later today.
Euro – European Markets
The Ifo report released earlier today showed that optimism among German firms improved for December. Considering strong German preliminary manufacturing PMI and ZEW data released earlier this week, today’s data has further strengthened hopes that the overall macro picture in the nation might be improving. However, the Euro showed little reaction to today’s data and has remained pressurised against the greenback after it briefly fell below the 1.23 mark earlier today.
Yesterday, the Euro lost ground against the US Dollar following the Fed’s policy statement. The revised data released in the Euro zone showed that consumer price inflation in the region remained in line with the preliminary estimate for November. However, the Euro came under pressure after Greece’s parliament failed to elect a new President in the first voting round. The ruling party lost by a considerable margin, fuelling fears among traders that this might result into a snap election going forward and result into the nation’s exit from the European Union if the opposition party comes in power.
Other Currencies – Highlights
The Kiwi Dollar lost ground against the greenback in yesterday’s trading session and dropped below the 0.77 level after the US Fed resorted to a hawkish tone in its post-meeting policy statement. However, losses in the Kiwi Dollar were capped, especially after the release of encouraging GDP numbers in New Zealand. The report showed that on a quarterly basis, economic growth in the nation was stronger than anticipated for the third quarter amid robust performance of the dairy industry and an upbeat trend in the manufacturing and services sector. Additionally, data indicated that domestic spending levels remained firm and growth in business investments gained pace, further boosting sentiment among investors.
With little on the domestic economic front today, market participants will keep a tab on the Markit preliminary services PMI numbers and weekly jobless claims data for further direction to the Kiwi Dollar-US Dollar pair. Additionally, tomorrow’s business confidence data in New Zealand for December will attract market attention.