Upbeat UK Retail Sales Support Sterling
Macro data released today showed that monthly retail sales in the UK rebounded more than expected for October, suggesting that consumer morale remains upbeat ahead of the upcoming holiday period. Today’s encouraging retail sales data has provided further support to Sterling after yesterday’s mostly hawkish BoE minutes lifted the Pound against its key peers.
Today, weak preliminary PMI readings across key European nations showed signs of further economic troubles in the Euro zone. Across the Atlantic, consumer price inflation and Markit manufacturing PMI data scheduled later today will be watched for further clarity on the future policy stance, especially after yesterday’s FOMC minutes did not provide a clear direction on the interest rate trajectory going forward.
Pound Sterling – UK Markets
Data just out has shown that retail sales in the UK rebounded more than expected on a monthly basis for October. Although the warm weather weakened sales among clothing retailers, lower fuel prices have likely driven consumers to spend more on other retail segments. After the recent annual consumer price inflation data showing an unexpected uptick for October, today’s report has offered further signs of some strength in domestic demand. Sterling is trading on a firmer footing against the majors this morning following the release of today’s UK data.
The Pound gained ground against its major counterparts in yesterday’s trading session following the minutes of the BoE’s latest policy meeting which revealed a mostly hawkish tone. The minutes were in contrast to the quarterly inflation report presented by the BoE Governor last week and indicated that inflation is expected to accelerate amid growth in business investment and domestic wages. Additionally, the publication revealed that slack in the nation’s labour market might soon exhaust and create an additional upward pressure on Britain’s inflation.
US Dollar – US Markets
The greenback showed little reaction against the majors following the release of the latest FOMC minutes. The Fed policymakers opined that the US Fed should convey market participants that the monetary policy decision will be data dependent to avoid any premature expectations to be built over the timing of an interest rate rise. However, the minutes failed to offer any hint about the timing of an interest rate rise and warned that weak global energy prices are likely to weigh on the domestic headline inflation going forward. In light of yesterday’s minutes, today’s consumer price inflation data in the US will attract considerable market attention. Although the nation’s annual inflation is anticipated to ease for October due to lower oil prices, the core inflation rate is expected to remain unchanged.
The US Dollar is trading in a tight range against its key peers this morning. After yesterday’s mixed housing market data in the US, investors’ attention has shifted back to today’s existing home sales data for further direction along with Markit manufacturing PMI reading.
Euro – European Markets
The Euro retreated against its major peers this morning following weaker than expected manufacturing PMIs from core Euro zone economies. Although economic data from Germany offered encouraging signals lately, the latest PMI data showed that growth in the German manufacturing sector stalled, while growth in the services sector unexpectedly weakened for November. Additionally, economic woes in France continued to accentuate, as the PMI data revealed that the overall private sector activity in France continued to contract. Market participants remained concern about the slow pace of recovery in the region, especially in the aftermath of sanctions on Russia and weak growth in emerging markets.
Going forward, traders will keep a tab on the European Commission’s preliminary report which is expected to show that morale among consumers in the Euro zone improved for November. Additionally, consumer price inflation data in the US scheduled later today is expected to keep investors in the Euro-US Dollar pair interested.
Other Currencies – Highlights
The Swiss Franc strengthened against the US Dollar this morning following the release of upbeat trade data in Switzerland. The report showed that trade surplus in the nation widened after exports from the nation rebounded to a touch a multi-year high for October. The improvement in exports was mainly led by higher demand for medical instruments and equipment in the US. This was another string of encouraging macro data this week, especially after yesterday’s ZEW survey which showed that sentiment among investors in Switzerland improved for November. However, the Swiss Franc has pared its gains against the greenback later in today’s trading session.
Market participants will keep a tab on the Euro-Swiss Franc pair which is trading near the Swiss National Bank’s lower limit, heightening prospects of an intervention by the central bank. Additionally, with consumer price inflation and Markit manufacturing PMI data scheduled in the US today, the Swiss Franc is expected to witness some volatility against the greenback.