The pound briefly slipped from a 3-week high yesterday on the shocking news of a terrorist attack outside parliament. Today, although the mood is sombre, there’s good news in just released data showing UK Retail Sales unexpectedly rose by 1.4% in February.

US President Donald Trump’s first bill before Congress, the Republican healthcare plan, appears unlikely to win today’s very close vote. This doesn’t bode well for Trump’s ability to deliver on his ambitious $1 trillion spending spree or his tax reform plans. The US dollar is down to a 4-month low and global markets are trading lower due to the uncertainty regarding the world’s largest economy.

Pound Sterling – UK Markets

The pound was at a monthly high yesterday, mostly as a result of the US dollar’s fall. The pound slipped slightly after the Bank of England (BoE) reported that the UK’s slump in sales caused by rising inflation will be partly offset by this year’s increasing exports and investment. The BoE report put the increase in inflation, that’s recently helped the pound gain value, into perspective. Those who thought the central bank would be pressed into raising interest rates are now reconsidering after taking the decrease in consumer spending into consideration. The bank noted continued resilience in the economy is giving companies the confidence to make investments.

Yesterday’s HIS Markit survey showed UK households feel the most pessimistic about their budgets than they have since 2013. This varied by region, with those in the Midlands reporting feeling the gloomiest about their financial prospects. This was followed by respondents in the north-east and London. Today’s retail data release confirms the effect that inflation, which has risen to 2.3% in February, has cut into spending which had been the principal force behind the UK’s growth. The higher than expected Retail Sales release has proved positive for the pound since it was expected that inflation would have cut into consumer spending. While the news is good for the month, spending was down by 1.4% for the 3 months to February. This marks the biggest drop since March 2010.

Yesterday’s scheduled Scottish referendum vote was cancelled after the tragic parliament terrorist attack and it’s unclear when it will be rescheduled. Today, 7 people have been arrested in the investigation into the attack which killed 4 persons and left 29 people injured.

US Dollar – US Markets

The US dollar is inching up from a 4-month low against the safe-haven Japanese yen today. Today’s vote on repealing Obamacare is seen as a litmus test for the Trump administration. It will be the central focus for global financial markets today. Investors who’d bet on Trump’s tax reform and infrastructure spending plans are now seeing his limits as a party leader. Unable to charm Republican party members into voting for the healthcare plan put forward by their own party, Trump threatened to ‘come after’ Republican senators who are critical of the bill. Among the most controversial issues with the healthcare bill are the cuts to healthcare benefits for poor and older Americans. This comes on the news that the president’s complicated lifestyle will require an additional $60 million in Secret Service expenses next year. Nearly half, or $26.8 million would provide protection for his family living in Trump Tower.

American Petroleum Institute figures that were out yesterday showed US oil inventories rose by more than expected, and the news of the oversupply drove oil prices to a near 4-month low. Separately, iconic US retailer Sears announced yesterday that it has ‘substantial doubt’ it can survive. The historic company transformed the America of a century ago when its catalogue sold everything farmers dreamed of owning. Once the US’s largest retailer, now, with online competition and a changing retail market, Sears is a dying dinosaur.

Euro – European Markets

The euro continues holding strength against the US dollar this week as the French political risks fade. Marine Le Pen’s chances of winning the French election seem increasingly remote although 40% of French voters are still undecided. Emmanuel Macron is the clear frontrunner in the latest polls, with 29% of the vote while Marine Le Pen and Francois Fillon are tied in third place with 19% of the vote. Today’s release of France’s Business Climate survey shows an unexpected drop in industrial confidence as the figure was expected to come in the same as previously at 107, but fell to 104. This has been attributed to political jitters ahead of the election.

Rising inflation is eroding German consumer confidence, according to today’s data release by GfK. Consumers expect that rising prices in April will continue keeping them from spending what they’d like to at the shops. Of the 2,000 people surveyed, slightly more were less optimistic about wages and spending power than in the previous poll for March sentiments. GfK concluded with an optimistic expectation that inflation would fall as the current decline in crude oil prices will be seen in lower prices ahead.

The Dutch government made clear its support for Dutch finance minister Jeroen Dijsselbloem after he criticised Southern European countries. Prime Minister Mark Rutte is supportive of the minister in spite of his insulting analogy, saying ‘I can’t spend all my money on booze and women and then ask you for your support.’ In Holland’s recent election, Dijsselbloem’s Labour Party retained only 9 of the 38 seats it had previously held, so his cavalier comments were likely made in expectation he’ll be replaced before his term ends in next January.

Other Currencies – Highlights

The New Zealand dollar has had a volatile recent run: it slipped against the pound which was still strengthened by the higher than expected inflation rate. The Kiwi dollar had been well served by the rise in dairy prices, since milk is one of the country’s main exports, but ultimately the pound proved the stronger of the pair. The increase in dairy prices at Fonterra’s Global Dairy Trade(GDT) was a welcome surprise after prices had fallen in the previous 2 quarters.

The Reserve Bank of New Zealand (RBNZ) decided not to adjust the interest rate, leaving it at 1.75%, in its March monetary policy meeting. This is expected to be the central bank’s strategy for the foreseeable future, given policymakers hopes of achieving a ‘decline in the exchange rate.’ The bank noted the volatility in dairy prices had caused the real value of the Kiwi-after trade was factored in-to fall by 4%. The RBNZ stated this was ‘an encouraging move’, indicating they’d would rather Kiwi shed more value in order to help the country’s crucial export sector. Ironically, the Kiwi rose by 0.11% against the US dollar and 0.32% vs the Aussie dollar on the news.