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The pound encountered selling pressure and was the second worst-performing currency of the morning London session after the Swissy, thanks to the U.K.’s disappointing retail sales report.

And while there was no apparent catalyst, the Greenback staged a broad-based recovery, likely because of short-covering after U.S. government shutdown worries apparently kicked the Greenback lower during the earlier sessions.

  • German PPI m/m: 0.2% as expected, 0.1% previous
  • Swiss PPI m/m: 0.2% vs. 0.4% expected, 0.6% previous
  • Euro Zone current account: €32.5B vs. €31.3B expected, €30.3B previous
  • U.K. retail sales m/m: -1.5% vs. -0.8% expected, 1.0% previous
  • U.K. retail sales y/y: 1.4% vs. 3.0% expected, 1.5% previous

Major Events/Reports

U.K. retail sales slump

The U.K.’s December retail sales report was released earlier today. And unfortunately (for pound bulls), the report revealed that retail sales volume in the U.K. slumped by 1.5% month-on-month, which is more painful compared to the consensus that retail sales volume would contract by 0.8%.

Year-on-year this translates to a 1.4% increase, a tick slower than the +1.5% recorded in November and a significant miss from the consensus that annual retail sales volume would expand by 3.0% in December.

Browsing through the retail sales report, the U.K. Office for National Statistics (ONS) blamed the disappointing readings on evidence that “shopping for Christmas has shifted in recent years from being mainly in December to more in November as consumers seem to be starting their purchasing earlier in line with Black Friday promotions.”

In short, Britons do their Christmas shopping in November, rather than December, which is why November saw a solid 1.0% month-on-month increase in retail sales volume.

Some risk-taking to end the week

Risk appetite was clearly the dominant sentiment during the morning London session since the major European equity indices were broadly in positive territory.

And market analysts say that the risk-on vibes during the session was due to positive earnings reports and confidence in the Euro Zone economy, which spurred demand for European shares.

  • The pan-European FTSEurofirst 300 was up by 0.43% to 1,574.70
  • Germany’s DAX was up by 1.00% to 13,414.00
  • The blue-chip Euro Stoxx 50 was up by 0.85% to 3,647.00

The risk-on vibes in Europe also gave U.S. equity futures a lift, hinting that risk appetite may carry over into the U.S. session. Although that may change depending on whether or not a U.S. government shutdown can be averted.

  • S&P 500 futures were up by 0.32% to 2,805.25
  • Nasdaq futures were up by 0.50% to 6,847.25

Major Market Mover(s):

GBP

The pound had a mixed start but began to encounter broad-based bearish pressure when the U.K.’s retail sales report failed to impress. The pound was only the second weakest currency of the session, though.

GBP/USD was down by 74 pips (-0.53%) to 1.3861, GBP/JPY was down by 72 pips (-0.47%) to 153.36, GBP/AUD was down by 68 pips (-0.40%) to 1.7295

CHF

The safe-haven Swissy barely lost out to the pound and was the biggest loser of the morning London session, likely because of the risk-on vibes.

USD/CHF was up by 50 pips (+0.52%) to 0.9591, AUD/CHF was up by 24 pips (+0.31%) to 0.7686, NZD/CHF was up by 13 pips (+0.19%) to 0.6986

USD

The Greenback is still a net loser for the day because of worries related to a potential U.S. government shutdown. However, the Greenback was able to stage a broad-based recovery during the morning London session and was even the best-performing currency of the session.

Other than short-covering by dollar bears, there wasn’t really any apparent catalyst for the Greenback’s bounce, though.

AUD/USD was down by 23 pips (-0.29%) to 0.8012, EUR/USD was down by 24 pips (-0.20%) to 1.2257, NZD/USD was down by 30 pips (-0.42%) to 0.7286

 

Watch Out For:

  • 1:30 pm GMT: Canadian manufacturing sales (1.9% expected vs. -0.4% previous)
  • 1:30 pm GMT: Canadian foreign securities purchases ($15.76B expected, $20.81B previous)
  • 3:00 pm GMT: University of Michigan Preliminary consumer sentiment (97.0 expected, 95.0 previous)
  • 5:15 pm GMT: U.S. Fed Governor Randal Quarles will speak