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The pound had an early wobble when the U.K.’s retail sales report failed to impress. However, pound bulls returned in force which allowed the pound to defeat the mighty Loonie and stand triumphant as the session’s champion.

In other news, the risk-off vibes were weighing down on the higher-yielding Aussie and Kiwi, with the Kiwi getting the worst of it.

  • Euro Zone current account: €35.1B vs. €32.3B exected, €39.0B previous
  • U.K. retail sales m/m: -1.2% vs. -0.6% expected, 0.8% previous
  • U.K. retail sales y/y: 1.1% vs. 1.9% expected, 1.5% previous

Major Events/Reports:

U.K. retail sales disappoint

The U.K.’s March retail sales report was, to put it bluntly, rather disappointing.

As for specifics, retail sales volume in the U.K. slumped hard by 1.2% month-on-month, a much sharper contraction compared to the consensus that retail sales volume only fell by 0.6%.

Year-on-year, this translates a 1.1% increase, which goes againt expectations that the annual reading will accelerate from 1.5% to 1.9%.

Moreover, the 1.1% increase in March is the weakest in five months and marks the second consecutive month of ever weaker annual readings.

The weak reading for March also means that total retail sales in Q1 2018 was 0.5% smaller compared to retail sales volume back in Q4 2017. And that, in turn, means that retail sales will be a drag on Q1 2018 GDP growth.

And looking at the details of the report, the weakness in retail sales was broad-based since all stores, with the exception of non-specialized stores, were reporting a weaker increase or a contraction in sales in March.

Oil surges

Commodities were mixed during the morning London session. However, oil benchmarks were standing out since they were surging across the board.

And market analysts say that the surge in oil prices was driven by the decline in U.S. crude oil inventories, as well as reports that Saudi Arabia wants to crude oil to reach crude to reach $80 to $100 per barrel.

  • U.S. WTI crude oil was up by 1.46% to $69.47 per barrel
  • Brent crude oil was up by 1.59% to $74.65 per barrel

Risk aversion dominates in Europe

The major European equity indices had an early show of strength, which market analysts attributed to positive earnings, the surge in oil prices, and speculation that that sanctions on Russia may disrupt the supply of other commodities.

However, it later became clear that risk aversion was the more prevalent sentiment in Europe since the major European equity indices came off their highs and most were already in the red by the end of the session.

It’s not yet clear what caused risk aversion to return, but tech shares were clearly the biggest losers and likely helped to dampen risk appetite.

In fact, market analysts say that tech shares helped to push U.S. equity futures lower during the morning London session.

  • The pan-European FTSEurofirst 300 was down by 0.03% to 1,495.88
  • Germany’s DAX was already down by 0.14% to 12,574.46
  • The blue-chip Euro Stoxx 50 down by 0.11% to 3,488.85

As mentioned earlier, U.S. equity futures were also feeling some bearish pressure from the risk-off vibes.

  • S&P 500 futures were down by 0.09% to 2,707.25
  • Nasdaq futures were down by 0.14% to 6,834.00

Major Market Mover(s):

GBP

The pound initially found itself getting swamped by sellers when the U.K.’s March retail sales report failed to meet expectations.

However, pound bulls quickly charged, allowing the pound to recover its losses and then some, so much so that the pound was able to defeat the Loonie and emerge as the one currency to rule them all (during this session at least).

It’s not entirely clear what caused the pound to stage a broad-based recovery (and nobody honestly knows), but some market analysts offered a host of reasons, which include technicals, bargain-buying on the perception that yesterday’s pound sell-off is already overextended, and seasonality.

GBP/USD was up by 36 pips (+0.26%) to 1.4236 with 1.4161 as session low, GBP/AUD was up by 65 pips (+0.36%) to 1.8269 with 1.8172 as session low, GBP/NZD was up by 98 pips (+0.52%) to 1.9484 with 1.9363 as session low

NZD

The Kiwi was the worst-performing currency of the morning London session. There weren’t any direct catalysts for the Kiwi, so it’s very likely that the higher-yielding Kiwi was under pressure because of the risk-off vibes in Europe.

NZD/USD was down by 18 pips (-0.26%) to 0.7305, NZD/CHF was down by 23 pips (-0.34%) to 0.7067, NZD/CAD was down by 36 pips (-0.40%) to 0.9207

Watch Out For:

  • 12:30 pm GMT: ADP’s Canadian private non-farm payrolls (32.7K previous)
  • 12:30 pm GMT: Philadelphia Fed manufacturing index (21.0 expected vs. 22.3 previous)
  • 12:30 pm GMT: U.S. initial jobless claims (230K expected vs. 233K previous)
  • 1:30 pm GMT: U.S. Federal Reserve Governor Randal Quarles will speak
  • 2:00 pm GMT: CB’s U.S. leading index (0.3% expected, 0.6% previous)
  • 4:30 pm GMT: BOE Deputy Governor Jon Cunliffe will speak
  • 10:45 pm GMT: Cleveland Fed President Loretta Mester will speak