Pound Higher on Upbeat Retail Sales
The just out retail sales report in the UK suggests that consumer spending was stronger than anticipated and fears that spending would stall were unfounded. Today’s upbeat figures have reduced concerns surrounding growth in the nation. Going forward, investors will keep an eye on the UK government’s borrowing report for May that is scheduled for release tomorrow.
Across the Atlantic, consumer prices and the weekly update on initial unemployment claims will be closely monitored. Meanwhile in Europe, focus will be on a meeting of the Euro group which is seen as the final chance to reach a deal before Greece’s scheduled payment to the IMF at the end of this month.
Pound Sterling – UK Markets
Data released just now showed a better than expected reading of retail sales as higher wages and lower inflationary pressures in the nation boosted consumers’ purchasing power. Excluding fuel, the figures were also better than expected and have raised optimism towards growth in the economy. Following the release of the data, the Pound is trading on a stronger footing against the US Dollar. Going forward, investors will keep an eye on tomorrow’s report on public sector net borrowing and markets anticipate borrowing for May to have risen,having unexpectedly fallen in the previous reported month.
The Pound surged above the 1.57 mark against the US Dollar yesterday following strong wage growth, with weekly earnings exceeding market expectations for the February to April period. Separately, the BoE in its recent monetary policy meeting minutes, indicated that the nine-member committee was unanimous in their decision to keep interest rate unchanged at a record low this month.
US Dollar – US Markets
The greenback traded broadly lower against its major peers yesterday and the Euro–US Dollar currency pair moved above the 1.12 mark after a fairly dovish Federal Open Market Committee refrained from explicitly guiding on the timing of an interest rate rise. The US Fed decided to keep its benchmark interest rate at the current level, while the Fed Chairwoman, Janet Yellen reiterated that the central bank’s future course of action would be data driven. However, policymakers kept the rate hike window open for the September meeting by indicating that the US economy is expanding moderately after contracting in the first quarter. At the same time, the US central bank slashed its economic growth forecast to 1.8% this year, lower than the 2% it had previously estimated.
On tap in the US today is the consumer price index, jobless claims, the leading indicators index and the Philly Fed manufacturing index. Markets anticipate consumer price growth in the US to have picked up in May, particularly due to a rebound in gasoline prices. However, the core inflation rate is expected to have dropped for the last month.
Euro – European Markets
Recovering from its previous session lows, the Euro is trading in a tight range against the Pound this morning. In terms of economic releases, it is a light calendar day in Europe and the Greek debt crisis is set to continue to dominate headlines. Today’s Euro group meeting is anticipated to attract significant market attention, even as EU officials indicated that they are not optimistic that the meeting would help with an agreement on Greece. The meeting is considered to be the final chance for the debt ridden nation and its international creditors to reach an agreement before the end of this month, by when Greece needs to make a payment of €1.60 billion to the IMF.
The Euro traded higher against the US Dollar yesterday. Amid growing concerns of a default facing Greece, the ECB yesterday raised the maximum emergency funding that Greek banks can get by €1.1 billion. Separately, data released yesterday confirmed that consumer prices across the Euro bloc rose in May.
Other Currencies – Highlights
The Swiss Franc is trading higher against the US Dollar this morning. The Swiss National Bank earlier today refrained from making any changes to its benchmark interest rate and left it unchanged at a record low of -0.75%, as widely expected. The central bank raised its inflation forecast slightly higher to -1.0% for 2015 and to -0.4% for 2016 and added that it continues to anticipate economic growth of just under 1% for 2015. In addition, the SNB in its financial stability report today indicated that conditions for the nation’s banking sector have improved, but some substantial risks still persist. In other economic news, Switzerland’s trade surplus widened for the fourth consecutive month in May, surpassing market expectations. However, exports continued to decline for May.
In the session ahead, trading in the US Dollar–Swiss Franc currency pair will be influenced by a string of economic releases in the US, including consumer price inflation, weekly labour market report and a survey by the Philadelphia Fed on manufacturing conditions.