The pound got pounding from its peers when the latest U.K. retail sales report failed to impress. The Greenback, meanwhile, staged a broad-based recovery.
- German WPI m/m: 0.9% vs. 0.2% expected, -0.3% previous
- U.K. retail sales m/m: 0.1% vs. 0.5% expected, -1.4% previous
- U.K. retail sales y/y: 1.6% vs. 2.6% expected, 1.5% previous
U.K. retail sales disappoint
The U.K.’s January retail sales report was released earlier and it revealed that retail sales volume in the U.K. only rose by 0.1% month-on-month, missing the expectations for a 0.5% increase by a wide margin and is the weakest monthly rise since April 2017 to boot.
This is a poor start for 2018 but is at least better than December 2017’s 1.4% slump.
Commentary from the U.K. Office for National Statistics (ONS) noted that “Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector. This can partly be attributed to a background of generally rising prices.”
Year-on-year, retail sales volume only increased by 1.6%, which is way off the the +2.6% consensus reading.
But on a slightly more upbeat note, January’s annual reading is a tick faster compared to December’s +1.5% and marks the third consecutive month of ever stronger annual readings.
ECB’s Coeuré speaks
ECB Executive Board Member Benoît Coeuré was speaking to reporters in Macedonia earlier.
And he said that the ECB’s “communication on monetary policy will change,” adding that “Certainly the expectation is that this will be discussed in early 2018.”
This is a rather hawkish message. However, Coeuré added a dovish twist when he also said that (emphasis mine):
“We have a clear expectation in the Governing Council, we have a clear sequence meaning that policy rates won’t be hiked before the end of the asset purchases. There is unanimity in the Governing Council on upholding this sequence.”
Some risk-taking to end the week
The major European equity indices were in positive territory, so Europe is apparently ending the trading week on an upbeat note.
And according to market analysts, risk-taking prevailed in Europe for yet another day because of another round of positive earnings results, as well as the general risk-on vibes from the earlier sessions.
- The pan-European FTSEurofirst 300 was up by 0.73% to 1,486.24
- Germany’s DAX was up by 0.48% to 12,405.50
- The blue-chip Euro Stoxx 50 was up by 0.91% to 3,418.00
U.S. equity futures were also in the green, pointing to possibly another risk-on day in Wall Street.
- S&P 500 futures were up by 0.24% to 2,740.50
- Nasdaq futures were up by 0.33% to 6,838.25
Major Market Mover(s):
The pound had a steady start but got rushed by sellers when the U.K.’s latest retailed report was revealed to have missed expectations.
GBP/USD was down by 70 pips (-0.49%) to 1.4048, GBP/CAD was down by 44 pips (-0.25%) to 1.7564, GBP/NZD was down by 49 pips (-0.26%) to 1.8981
The Greenback staged a broad-based recovery and was the best-performing currency of the morning London session.
There weren’t really any direct catalysts for the Greenback’s recovery, but short-covering after a week of steady losses is a possible reason.
EUR/USD was down by 55 pips (-0.44%) to 1.2473, EUR/CAD was down by 33 pips (-0.21%) to 1.5595, EUR/NZD was down by 35 pips (-0.20%) to 1.6855
The euro was the second worst-performing currency after the pound. The euro has actually been retreating since the earlier Asian session, but it did find more sellers after ECB’s Coeuré gave his comments about interest rates not budging anytime soon.
USD/JPY was up by 25 pips (+0.24%) to 106.27, USD/CHF was up by 38 pips (+0.42%) to 0.9244, USD/CAD was up by 31 pips (+0.25%) to 1.2503
Watch Out For:
- 1:30 pm GMT: U.S. housing starts (1,234K expected, 1,192K previous) and building permits (1,300K expected, 1,302K previous)
- 1:30 pm GMT: Canadian manufacturing sales (0.3% expected, 3.4% previous)
- 1:30 pm GMT: Canadian foreign security purchases ($19.18B expected, $19.56B previous)
- 3:00 pm GMT: University of Michigan consumer sentiment index (95.4 expected, 95.7 previous)