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The pound ruled all during today’s morning London session, thanks to a better-than-expected retail sales report. The pound did have a harder time against the yen and the Swissy, though, likely because of renewed demand for the two safe-havens, given the persistent risk-off vibes.

The Aussie is noteworthy as well since it was the worst-performing currency of the session after being the top dog during the earlier Asian session.

  • U.K. retail sales m/m: 2.3% vs. 1.1% expected, -1.4% previous
  • U.K. core retail sales m/m: 2.0% vs. 1.0% expected, -1.2% previous

Major Events/Reports

U.K. April Retail Sales Report

The U.K.’s latest retail sales report revealed that retail sales volume surged by 2.3% in April. This is a bigger increase than the +1.1% consensus and is a major rebound after the 1.4% contraction in March.

In addition, the most recent monthly increase is the biggest since January 2016, so Q2 is starting on a strong footing.

The increase was pretty broad-based as well, with only non-specialized store types reporting a fall in retail sales volume, textile, clothing and footwear stores in particular.

And this broad-based increase in retail sales volume is the reason why the core reading also surged by 2.0%, which is twice the expected 1.0% increase.

Year-on-year, retail sales volume increased by 4.0%, which is much higher than both the +2.1% consensus and the +2.0% reported increase in March. Moreover, the annaul increase in April is the biggest in five months and puts an end to two months of weaker increases.

Looking at the details, non-specialized stores were once again the only drags, reporting a 0.4% year-on-year decrease in retail sales volume. All other store types, meanwhile, reported increases.

And this broad-based increase on an annual basis is why the core annual reading also printed an upside surprise (+4.5% vs. 2.6% expected, 2.8% previous).

Conservative Party’s Manifesto released

Theresa May’s Conservative Party released its 88-page manifesto earlier today.

A very quick scan of the manifesto reveals that there will be no increase to the level of VAT. Also, corporate tax “is due to fall to seventeen per cent by 2020 – the lowest rate of any developed economy – and we will stick to that plan, because it will help to bring huge investment and many thousands of jobs to the UK.” No word on deeper tax cuts than that, though.

With regard to immigration, the manifesto promised to “reduce immigration to sustainable levels, by which we mean annual net migration in the tens of thousands, rather than the hundreds of thousands we have seen over the last two decades.” However, the U.K. will mainly “continue to bear down on immigration from outside the European Union.”

Commodities routed

Most commodities extended their loses during the morning London session, with oil and base metals getting hit particularly hard.

Base metals got hammered pretty hard.

  • Copper was down by 2.02% to $2.495 per pound
  • Nickel was down by 1.04% to $9,032.50 per dry metric ton

Oil benchmarks got torpedoed.

  • U.S. WTI crude oil was down by 1.57% to $48.30 per barrel
  • Brent crude oil was down by 1.59% to $51.38 per barrel

Other than gold, precious metals were also down.

  • Gold was down by 0.24% to $1,261.69 per troy ounce
  • Silver was down by 0.75% to $16.779 per troy ounce

Market analysts blamed the broad-based commodities retreat on the ongoing political drama in Washington, since that apparently cast doubt on Trump’s planned infrastructure program.

Some market analysts also pointed to yesterday’s rise in U.S. oil inventories as a probable reason as to why oil benchmarks were extra weak today.

The bleeding continues

Risk aversion just won’t go away, and so European equity indices slumped hard for another day.

  • The pan-European FTSEurofirst 300 was down by 1.08% to 1,521.46
  • Germany’s DAX was down by 0.76% to 12,535.50
  • The blue-chip Euro Stoxx 50 was down by 1.01% to 3,547.00

U.S. equity futures were also in the red, hinting that the risk-off vibes will likely continue into the U.S. session.

  • S&P 500 futures were down by 0.22% to 2,352.25
  • Nasdaq futures were down by 0.21% to 5,567.00

Are market analysts still blaming the risk-unfriendly environment on the political drama in Washington? They sure are.

Other than that, energy and basic materials were the worst-performing sectors, so the commodities rout likely poisoned overall sentiment as well.

Major Market Mover(s):

GBP

The pound shot higher across the board when the U.K.’s better-than-expected retail sales report got released. The upbeat report obviously has intrinsic value. However, it really shines when you also consider that the BOE has been warning about a potential slowdown in consumer spending.

GBP/USD was up by 67 pips (+0.52%) to 1.3023, GBP/AUD was up by 136 pips (+0.77%) to 1.7508, GBP/CAD was up by 119 pips (+0.68%) to 1.7765

JPY & CHF

The yen retreated while the Swissy held steady during the earlier Asian session, which was kinda weird since risk aversion prevailed. All became right with the world again during the morning London session, though, since the yen and the Swissy resumed their advance.

USD/JPY was down by 47 pips (-0.43%) to 110.76, EUR/JPY was down by 73 pips (-0.60%) to 123.17, CAD/JPY was down by 48 pips (-0.59%) to 81.18

USD/CHF was down by 22 pips (-0.24%) to 0.9784, NZD/CHF was down by 19 pips (-0.28%) to 0.6777, EUR/CHF was down by 44 pips (-0.41%) to 1.0881

AUD

After just shrugging off the commodities rout and risk aversion during the earlier Asian session, the Aussie finally waved the white flag of defeat and succumbed. And as a result, the Aussie erased its gains on most pairs and ended up as the worst-performing currency of the session.

AUD/USD was down by 18 pips (-0.26%) to 0.7437, AUD/CHF was down by 35 pips (-0.48%) to 0.7277, AUD/JPY was down by 54 pips (-0.66%) to 82.38

Watch Out For:

  • 12:30 pm GMT: Canadian foreign currency purchases ($17.23B expected, $38.84B previous)
  • 12:30 pm GMT: U.S. initial jobless claims (240K expected, 236K previous) and Philly Fed manufacturing index (19.9 expected, 22.0 previous)
  • 2:00 pm GMT: U.S. Treasury Secretary Steven Mnuchin will testify before the Senate Banking Committee
  • 2:00 pm GMT: CB’s U.S. leading index (0.4% expected, same as previous)
  • 5:00 pm GMT: ECB Overlord Mario Draghi has a speech
  • 5:15 pm GMT: Cleveland Fed President Loretta J. Mester will speak