Negative News for GBP
Downside sentiment over the global economy (following the news from China of a lowering in its growth target), Middle East tensions and the ongoing euro zone (Greece) story have become elevated with overnight indices having underperformed and the tone is unlikely to be any different today.
Meanwhile, as expected the RBA (Reserve Bank of Australia) left rates on holds at 4.25%, moreover the subsequent statement could be seen as a déjà vu moment with governor Stevens reiterating the point that the European threat had moderated, the domestic economic outlook was running close to trend while their inflation forecasts were within the 2-3% target range while borrowers interest rates were close to medium term averages.
In the UK, British Retail like-for-like sales printed -0.3% year on year. The BRC (British Retail Consortium) noted that the reality of weak sales shows that a convincing revival remains illusory and furthermore noted that while decelerating inflation had helped arrest the slide in consumer confidence … that was at risk from fuel price rises and Budget uncertainty. To add to the somewhat gloomy picture, Halifax House prices out this morning had fallen further than expected, printing -0.5% against estimates of 0.3% and the Jan reading of 0.6% on a monthly basis while 3mths/year recorded -1.9% from -1.8%.
The flash estimate showed eurozone GDP contracting by 0.3% in the three months to December leaving the eurozone on the verge of experiencing another recession. Today we get the second estimate including the expenditure breakdown and the market is looking for household spending and business investment to fall, while government spending remains unchanged on the quarter. While German activity fell by 0.2% as expected, the French economy expanded by 0.2%, beating market expectations for a similar size decline. Of course, a better result in the core needs to be offset against a much softer picture in the periphery where the need for austerity measures is weighing much more heavily on activity than expected.
The result of all of this is moderate USD gains versus EUR and GBP.
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