Hey, Big Spenders!
Sterling saw the first day of substantial gains yesterday as a result of Retail Sales data that smashed expectations and demonstrated that Brits are still hitting the high streets. The increase from -0.9% to 1.4% for the month of July was significantly larger than the expected increase of 0.1%, causing Sterling to strengthen across the board. GBPUSD recovered back to two week highs closing in on 1.3200 levels, whilst GBPEUR and GBPJPY both reset the losses seen earlier in the week.
The Pound will look to hold onto those gains today as we get some insight into UK Public Sector Net Borrowing. With fears that the current government debt is unsustainable due to a weak Pound, poor data could exacerbate Sterling weakness.
Data from the US was strong yesterday but failed to significantly impact currency markets due to more influential releases from elsewhere. The Philly Fed Manufacturing Index printed at 2.0 and Unemployment Claims are down to 262k but the Dollar failed to make any gains following these results. EURUSD held above 1.1300 and Cable held close to 1.3200. There is no data due from the States today, so the Dollar will be guided by market sentiment again.
The Euro weakened by 0.48% in yesterdays European trading session as the Consumer Price Index hit targets at -0.7% but failed to better last month’s figures of 0.0%. Sterling ended the day at the 1.1598 levels.
Data to watch: 7am EUR German Producer Price Index. 9.30am UK Public Sector Net Borrowing. 6pm US Baker Hughes US Oil Rig Count.