UK Retail Sales Rebound in July
Focus this morning has switched over to the just released UK data which showed that retail sales excluding fuel rose in July, matching market forecasts. However, the broad measure of retail sales fell short of consensus expectations.
Those hoping for an interest rate rise next month were dealt a blow last night. With the US Fed’s FOMC minutes showing a dovish tilt, dousing expectations of a September rate rise, with policymakers indicating that inflation in the nation was not high enough for it to start raising rates yet. Looking forward, US weekly jobless claims, existing home sales and Philly Fed manufacturing index are on tap. Elsewhere, Greece met its debt obligations to the ECB after receiving its first tranche of bailout funds.
Pound Sterling – UK Markets
Sterling's fight back is now well and truly underway! Economic data that came in just now showed a moderate rebound in UK retail sales for July, after sales across retail firms had unexpectedly dipped in the previous reported month. Data revealed that retail sales excluding auto fuel in the consumer driven economy picked up in line with market expectations, with purchasers spending more in July as consumers benefited from low borrowing rates and faster wage growth. However, sales including fuel fell short of market estimates for July. A recent survey by the Confederation of British Industry had showed that retail sales balance in July was at its lowest level since April this year. The modest retail sales data, despite the recent strength in wage growth has once again brought the future stance of the BoE in regards to interest rate movement into focus. The Pound has given back gains and is trading lower against the US Dollar, post the release of UK retail sales data.
Sterling surged closer to the 1.57 mark against the US Dollar yesterday, in the wake of dovish FOMC minutes which were not in favour of an immediate rate rise in the US. Don't expect this news to halt the proposition for too long though!
US Dollar – US Markets
Somewhat subdued news from across the pond! The US Dollar traded sharply lower across the board yesterday after minutes from the last US Federal Reserve meeting highlighted concerns ranging from lagging inflation in the US to weakness in the global economy, thus casting doubts about the likelihood of the Fed raising its benchmark interest rate in the coming months. Though policy setters at the July meeting expressed confidence in the US economy’s ability to eventually start pushing prices up, the uncertain tone of the minutes suggested that a rate rise in the next September meeting was unlikely. Inflation continues to remain the top most concern among Fed officials. A separate government publication yesterday indicated that overall consumer prices rose below market estimates for July and well below Fed’s desired inflation rate. If the mood in the Fed wasn't sombre last week, it must certainly be this week!
The greenback has recovered some of its losses against the Pound this morning. Moving ahead, investors will keep a tab on the latest weekly update on unemployment claims, existing home sales data and a survey report on manufacturing conditions in the Philadelphia region in the US, scheduled today, for further direction.
Euro – European Markets
Continuing good news on the Continent! Yes not even an ongoing Greek tragedy can bring the mood down. The shared currency has managed to regain ground against the Pound this morning. According to some media reports, Greece this morning repaid a €3.4 billion debt payment to the European Central Bank after it received its first tranche of the multi-billion rescue package facilitated by the Euro group officials. The move came after the European Stability Mechanism approved Greece’s new rescue package late yesterday to help the cash strapped nation meet its urgent debt obligations and recapitalize its banks.
It is another light day for economic releases in Europe today. German producer prices for July, headlining the European economic calendar today, came in unchanged from the previous month. Data released earlier in the day indicated that the decline in German factory prices was in line with market consensus, reinforcing the view that economic recovery in the Euro zone’s largest economy has not been sufficient enough for German producers to push up prices. This is surely only a temporary blip though!
Other Currencies – Highlights
The US Dollar – Swiss Franc currency pair dropped below the 0.97 mark and is trading close to multi week lows this morning as sentiment for the greenback weakened across the board after the FOMC minutes failed to provide any clear signals of an imminent interest rate rise by the US Federal Reserve.
In economic news, data released earlier in the day revealed that Switzerland’s trade surplus widened for July as imports fell faster than the drop in exports. The strength of the Swiss Franc continued to act as a drag on the nation’s exports, with July exports falling at a faster than earlier pace. Switzerland’s trade balance data had a limited impact on trading in the Swiss Franc and it is currently trading in a tight range against the greenback. In the session ahead, traders will eye a set of US economic releases due later in the day for further direction in the currency pair.
Have a great day!