UK Retail Sales Grew at the Fastest Pace in 15 years
Clothing sales received a major thrust from the colder weather, while supermarkets took advantage of Halloween festivities, hurtling the UK retail sales annual growth to its highest level in more than 14 years.
Yesterday’s tepid US industrial output and producer prices data have increased expectations that today’s inflation figures from the world’s largest economy may reveal a less than anticipated pace of acceleration. The numbers are expected to influence today’s US Dollar direction as well as bond yields. But, that it is not the only thing which traders would eye. Investors await US building permits, housing starts, jobless claims and the US Federal Reserve (Fed) Chairwoman, Janet Yellen’s testimony, in what promises to be an action-packed day. Eurozone inflation figures would also be assessed by the market.
Pound Sterling – UK Markets
The Pound is trading with a bullish tone against the US Dollar. It has surpassed the crucial 1.25 handle this morning after the just out data showed that UK’s retail sales blew past expectations in October, as cooler weather bolstered spending on winter fashions lines. Clothing and footwear sales saw their biggest increase in more than two and a half years. On an annual basis, retail sales climbed to its highest level in more than 14 years.
Yesterday, Sterling edged higher against the greenback for a brief period, after data showed that UK’s ILO unemployment rate unexpectedly declined to 4.8% during the three months to September, notching its lowest level in 11 years, thereby indicating that the labour market has coped up well so far in the wake of Brexit vote. Moreover, the average weekly earnings advanced for the same period. Meanwhile, the number of jobless claims significantly increased in October from September, registering its biggest increase since May. UK’s employment data portrayed a mixed picture of the nation’s job market, adding to the uncertainty in the economy.
US Dollar – US Markets
Yesterday, the greenback strengthened against most of its major peers. Data indicated that US industrial production was flat in October, as unusually warm weather dampened demand for home and office heating appliances, while manufacturing and mining sectors continued to show signs of stabilisation. Separately, the St. Louis Fed President, James Bullard, hinted that a single policy rate increase in December may be sufficient to move monetary policy to a neutral setting. He further indicated that the US economy could receive a medium-term boost if Donald Trump boosts infrastructure spending and tax reforms.
This morning, the US Dollar has reversed its previous session gains against the Pound and the Euro. Market participants will focus on the US consumer price index, Philadelphia Fed manufacturing survey, housing starts, building permits and weekly initial jobless claims data. Going further, the Fed Chief, Janet Yellen’s testimony before the Congress will hog most of the limelight today. It will be interesting to know whether the Fed remains on track to increase interest rates after Donald Trump’s victory in the race to the White House.
Euro – European Markets
The Euro is trading on a firmer footing against the greenback this morning. Data released from the statistics office, INSEE, showed that unemployment rate in France unexpectedly advanced in the third quarter of 2016. Moreover, the ILO unemployment rate also rose during the same period. The rise in jobless rate will be a shocking news for the French President, Francois Hollande, as he decides whether he will run for the re-election next year. Meanwhile, Italy’s trade surplus expanded in September from its previous month.
Moving ahead, traders will keenly watch the key economic release in the Eurozone, i.e. the consumer price index figures along with the construction output data. The region’s consumer price index is expected to rise on a monthly basis in October. Going further, the European Central Bank’s (ECB) monetary policy meeting accounts, scheduled for release in a few hours, will be closely monitored by currency traders. The central bank is expected to shed light on the ECB’s further policy stance and will provide more hints whether it will extend the QE programme beyond March 2017.
Other Currencies – Highlights
The Australian Dollar is trading lower against the greenback this morning. Earlier in the session, Australia’s jobs report revealed that unemployment rate surprisingly remained unchanged in October. Additionally, the Australian economy added less than anticipated number of jobs in October, with the full-time employment witnessing a gain while part time jobs fell. The downbeat employment report is in line with Reserve Bank of Australia’s (RBA) concerns about the labour market, as projected in its minutes released earlier in the week. It remains to be seen how much this becomes a factor for the RBA when it formulates monetary policy at its next meeting. Accompanying the employment report was the wage cost index released yesterday, which indicated that the nation’s wage growth continued to slow on a quarterly basis in the three months ended September, while annual wage growth slowed to an all-time low in the same period.
Elsewhere, in China, Australia’s largest trading partner, foreign direct investment advanced on annual basis in October.