Firm Global Risk Supporting Sterling
The UK CBI retail sales survey dipped to -6 for August from 4 the previous month and below consensus forecasts of 7. Sales are also forecast to decline at a faster pace in September with a reading of -17 for the expectations component. Orders are forecast to decline sharply for the month, although retailers do expect the situation to improve over the next few months. Labour-market trends will be an important focus with August employment cut at the fastest pace since February 2009 and companies expect the rate of job cuts to increase further in September.
Sterling held firm despite reservations over the outlook and the UK currency gained an element of support from firm global risk appetite as global equity markets held a firm tone, although UK equities moved lower. Sterling extended gains to 1.3170 against the Dollar while dipping against the Euro to lows around the 1.1065 mark.
Sterling currently trades around the 1.3145 against the Dollar and 1.1130 against the Euro.
US consumer confidence declined to a 6-year low of 84.8 for August from a revised 91.7 previously and below consensus forecasts of 93.0 with significant monthly declines in both the current conditions and expectations components. There was fresh deterioration in confidence surrounding the labour market for the month.
New home sales increased to an annual rate of 901,000 for July from a revised 791,000 the previous month and well above market expectations of 785,000.
The Richmond Fed manufacturing index strengthened to 18 from 10 previously with an increase in new orders on the month. There was also an increase in employment on the month and companies reported a sharp decline in the availability of skills needed.
The dollar overall edged higher following the US releases as a more defensive tone surrounding risk appetite tended to protect the US currency.
The German IFO business confidence index strengthened to 92.6 for August from 90.4 previously and above consensus forecasts of 92.2. The current conditions component advanced to 87.9 from 84.5 previously while the expectations index advanced slightly to 97.5 from 96.7, slightly below market expectations. The data underpinned confidence, although there were still reservations over the services-sector outlook.
The Euro made limited gains following the data but was unable to progress throughout the US session with selling pressure coming in around 1.1845.
The German government also announced that labour-market subsidies would be extended until the end of 2021, but markets remain cautious over continued coronavirus developments.
Data to watch
13:30 – USD – Core Durable Goods Orders
13:30 – USD – Durable Goods Orders
15:30 – USD – Crude Oil Inventories