US Retail Sales in the Limelight Today
Economic data flow from across the Atlantic will pick up pace later in the day after a slow data week. Greater market focus will be on the US retail sales report to gauge the likelihood of the Federal Reserve raising its benchmark interest rate in March. Additionally, investors will also keep a tab on the US producer prices data, industrial production and Michigan University’s preliminary consumer confidence index, scheduled in a few hours.
In Europe, a pair of final CPI prints confirmed that Spain’s consumer price growth was flat in December while Italy showed nascent recovery in inflation during the end of 2015. In the UK, the just out construction output data showed a steep decline during November.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing against its major currency counterparts this morning. The decline could be linked to the Bank of England’s (BoE) announcement of its latest rate decision yesterday. Sterling hardly moved today, even after the just out UK’s economic data showed that November’s construction output recorded its biggest annual drop since May 2013. Data indicated that bad weather weighed on the construction industry which accounts for 6% of UK’s GDP.
The BoE opted to leave its benchmark interest rate unchanged at 0.5% as widely expected. Accompanying the BoE’s policy decision was a rather dovish statement which underlined subdued economic growth both in the UK and emerging markets, as well as a renewed slide in oil prices, putting pressure on the near term inflation outlook. Considering these factors, the UK central bank has triggered further doubts on whether the BoE rate rise would occur anytime soon, or even this year. The Pound, however, had partially recovered against the US Dollar yesterday after the BoE’s Ian McCafferty voted for a rate rise, as has been the case for the past several monthly meetings.
US Dollar – US Markets
The US Dollar is trading lower against the shared currency this morning, while investors gradually shift their focus to a slew of economic releases including the notable retail sales print scheduled in the US later today. The US retail sales growth is anticipated to have stalled in December, compared to a modest pickup seen in the previous month. If the forecast turns out to be true, the dismal data will be considered as bad news for the retailers as consumption remained weak despite the holiday shopping season. Excluding automobiles, US retail sales is estimated to record a moderate gain for December. Separately, University of Michigan’s consumer sentiment index, producer prices, industrial production and manufacturing data are also due today.
Yesterday, the US Department of Labour reported a greater than expected rise in the number of individuals applying for first-time weekly unemployment benefits. However, the figures remained well within the levels, reflecting a strong US labour market. The claims data, however, was hardly influential to trading in the US Dollar against its key peers.
Euro – European Markets
The Euro is trading above the 1.09 mark against the greenback this morning. Second tier economic releases from the Euro area earlier today seem to have had little impact on trading in the Euro against the major currencies. A final set of subdued inflation numbers from two of Euro region’s economies today highlighted the European Central Bank’s struggle to bring inflation back up to its medium term target. The final consumer prices data in Spain earlier today confirmed lack of price pressures in the nation’s economy for December. Also, Italy’s final CPI print showed signs of listless recovery in the end of 2015.
Weak inflationary pressures across the Euro zone had coerced the ECB in December to reduce the deposit rate and also extend its asset purchase programme by six months, through March 2017. Meanwhile the ECB’s account of last month’s meeting, which was published yesterday, noted that there was considerable opposition to the measures put forward in the meeting. Minutes revealed that some of the policymakers had pushed the bank to act more aggressively before additional modest measures were announced.
Other Currencies – Highlights
The New Zealand Dollar failed to maintain its recovery momentum and resumed its downtrend against the US Dollar earlier today, with the currency pair trading below the 0.64 mark. The Kiwi Dollar surrendered yesterday’s gains against the greenback following renewed pressure on oil prices and disappointing economic data from one of its major trading partners, China. Investors have been on the edge since the start of the year due to a collapse in oil prices and concerns surrounding the health of the global economy which was sparked due to a slowdown in China.
In the session ahead, amid the absence of significant macroeconomic indicators in New Zealand today, investors focus will remain on oil price movement and broader market sentiment across the globe. Also, upcoming US economic releases including the noteworthy US retail sales print along with industrial and consumer confidence data will also be closely monitored for further direction.