The Pound tumbled against the US Dollar and the Euro after the Office for National Statistics (ONS) published September’s UK retail sales data. According to the ONS, retail sales hit a four-year low, taking a blow from the slow wage growth and rising inflation. The results of the survey totally missed expectations and will affect the Bank of England’s (BoE) debates on whether or not to raise borrowing costs.

In Brussels, the two-day European Union (EU) Council summit starts today during which the developments in the Brexit negotiations will be discussed. Prime Minister Theresa May is attending the meeting, while back in London some members of the Cabinet are pressing her to walk away from talks with the EU leaders, in case they continue to refuse a trade deal with the UK. In Spain, the government is preparing to invoke Article 155 which could suspend Catalonia’s autonomy, after the Catalan leader said that he will declare independence if Madrid continues to prevent dialogue between the two communities.

Pound Sterling – UK Markets

Today, Sterling dipped against the US Dollar with the exchange rate set at $1.31. The Pound also dropped against the Euro with the exchange rate set at €1.11. The reason for Sterling’s tumble was the UK retail sales hitting a four-year low in September.

In the morning, the ONS published data regarding retail sales in Britain. The results were disappointing, as UK shoppers made cutbacks on purchases. Retail sales were increased by 1.2%, on an annualised basis, instead of increasing by 2.1% as City analysts were expecting. On a month-to-month basis, retail sales in September were decreased by 0.8%, far below the -0.1% anticipated by market experts. Retail sales, excluding fuel, both on a monthly and a yearly basis, came in lower than expected.

Non-food stores were the ones to suffer the biggest drop in sales. ONS data showed that retail sales growth as an average in the last three months has slowed significantly, to the lowest level since Autumn 2013. Economists suggest that the disappointing retail sales figures may weigh down expectations that the BoE will decide on hiking its benchmark interest rate in its November monetary policy meeting.

US Dollar – US Markets

The US Dollar dipped against the Euro with the exchange rate set at €0.84. The US Dollar Index (DXY), which measures the value of the Dollar against a basket of six competitor currencies, lost ground, coming in at 93.34. In the afternoon, the Department of Labour will release data regarding initial and continuing jobless claims, while the Philadelphia Fed will publish its monthly manufacturing survey.

Dow Jones Industrial Average closed above 23,000 for the first time in its history, yesterday, driven by a rise in value of IBM shares, which enjoyed the best trading day since 2009. The reason for the jump in the share’s value was that IBM posted better than expected earnings, signalling the firm’s return to revenue growth. Dow Jones Index had hit 22,000 in the beginning of August. However, some market strategists claim that a possible failure of passing the tax reform bill could cost the stock market anywhere from 4% to 10%.

US Treasury Secretary Steven Mnuchin said in an interview that he gives his “absolute guarantee” that the tax reform bill will be ready to be signed off by President Trump by early December. Trump said a few days ago that he would like to see the bill ready by Christmas time. Mnuchin noted that if the bill isn’t ready by then, stock markets will face a reversal of significant amounts of gains made in the past months. So far, eight out of ten S&P 500-member firms which have published their earnings reports, have beat market expectations.

Euro – European Markets

The Euro strengthened against the US Dollar with the exchange rate set at $1.18. The absence of important economic data releases has shifted attention to the Catalan problem as Mariano Rajoy’s deadline expired.

The Spanish Prime Minister had urged the Catalan separatist leader, Carles Puidgemont, to clarify if he officially declared Catalonia’s independence some days ago, giving him a deadline until Thursday morning. Puidgemont sent a letter to the Spanish government in Madrid in which he admitted that the declaration of independence wasn’t voted in the regional parliament and remains suspended. However, Puidgemont attacked Rajoy, noting that if he persists in preventing dialogue between Catalonia and the Madrid government, the parliament in Barcelona will declare independence.

A Reuters poll among economists showed that the majority expects the European Central Bank (ECB) board to announce a reduction in monthly asset purchases from January, in its 26th October meeting. Most of them believe that purchases will be reduced by €20bn each month, at first. In Germany, the DHK Chambers of Commerce revised their 2017 GDP forecast to 2.0% from 1.8% previously. The survey showed that German firms see, as main risks, the shortage of skilled labour and raising labour unit costs.

Other Currencies – Highlights

Sterling fell against the Australian Dollar, trading at 1.67 AUD. A report by the Australian Bureau of Statistics (ABS) showed that the unemployment rate fell in September to 5.5%. This is the lowest level since February 2013. Almost 19,800 new jobs were added to the Australian economy, beating analysts’ expectations for adding 15,000 new positions.

The Pound jumped against the New Zealand Dollar, trading at 1.87 NZD. Winston Peters, the leader of NZ First, announced his party’s intention to form a coalition government with Labour party. Jacinda Ardern, the Labour leader, will be the next Prime Minister. Peters said that markets should expect a change in monetary policy and mentioned that a lower Kiwi would be desirable.

Sterling dropped against the Swiss Franc, trading at 1.28 CHF. The Federal Customs Administration released a report which showed that Switzerland’s trade balance surplus increased significantly in September, surpassing market expectations.