British Consumers Start to Feel the Pinch
Unlike yesterday, there are a bunch of economic releases scheduled across the world today which are bound to keep global economy watchers busy. In the UK, a report by the British Retail Consortium (BRC) revealed that retail sales dipped in January, adding to signs that Brits might be tightening their purse strings amid rising inflation. Separately, house prices in the UK dipped for the first time since mid-2016.
From the Eurozone data space, German industrial production unexpectedly declined in December. Across the Atlantic, market participants will receive an update on the JOLTS job openings for last year’s close. In addition to this, the US trade balance and consumer credit change data, are also up for release later in the day.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing for a fifth consecutive session against the greenback this morning. This week has kicked off with data released by UK’s BRC which showed that British annual retail sales unexpectedly fell in January, recording its weakest performance since last August and amid slower sales of non-food products. The rise in consumer prices might be beginning to weigh on consumer spending. Another report released by the mortgage lender, Halifax indicated that UK’s house prices declined for the first time in five months in January. The UK economic calendar is devoid of economic releases for the remainder of the day.
At the 3-day debate regarding the Brexit bill which began in the House of Commons yesterday, UK Prime Minister, Theresa May guaranteed to protect the rights of European Union citizens to stay in UK after Brexit and mentioned that it will be a priority during negotiation talks. The House of Commons votes tomorrow on the amendments to the bill, which will decide the future course of the Brexit deal.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the Pound this morning, extending its gains for the fifth consecutive session. Ahead in the day, market participants will focus on the US trade balance data for December. Additionally, the JOLTS job openings data will be eyed for further cues in the greenback. Job openings are estimated to show a rise for December. Apart from this, the US IBD/TIPP economic optimism index and consumer credit change data are also up for release later in the day.
Yesterday, the greenback ended higher against the shared currency and Sterling. On the data front, the US labour market conditions index, the Federal Reserve’s (Fed) in-house tool to gauge the health of the nation’s labour market, recorded an increase in January, following a revised rise in the previous month. In other news, the Philadelphia Fed President, Patrick Harker, stated that he might support raising short-term interest rates at the central bank’s next monetary policy meeting in March, given that the nation’s economy remains robust.
Euro – European Markets
This morning, the Euro added to its losses against the US Dollar, following the release of disappointing data points from the Eurozone’s largest economy. Data showed that Germany’s seasonally adjusted industrial production tumbled in December, its steepest fall since January 2009, led by a sharp drop in manufacturing output. In other news, French trade deficit contracted in December, as growth in exports outpaced that of imports. Meanwhile, the nation’s current account deficit also narrowed during the same month.
Yesterday, the shared currency declined to a 1-week low against the greenback, after the ECB President, Mario Draghi, stated that the Eurozone's economic recovery is picking up strength but still requires stimulus. He further indicated that the recent rise in inflation in the Euro area was largely due to impact of higher oil prices, while underlying inflationary pressures remain subdued. The Euro also struggled amid concerns over French politics ahead of the Presidential vote in April as well as other impending elections in Europe.
Other Currencies – Highlights
The Aussie Dollar has reversed its earlier gains and is trading lower against the US Dollar this morning. The Reserve Bank of Australia (RBA) held the official cash rate steady at 1.5% during its latest monetary policy meeting. The committee believed that maintaining the current policy stance was consistent with sustainable economic growth and to attain the inflation target of 2.0%. In the accompanying rate statement, the RBA stuck to its economic growth forecast over the coming years and expected headline inflation to rise beyond the bank’s 2.0% target over the current year.
Earlier in the session, data showed that Australia’s construction sector activity contracted for a fourth consecutive month in January. Additionally, the nation’s retail sales surprisingly dropped in December, amid a sharp decline in demand for household products. Separately, in China, Australia’s largest trading partner, services sector growth slightly slowed in January, although remaining in the expansionary territory, as businesses posted a robust increase in orders.