Sterling holds despite data
Overall confidence in the UK currency remains strong amid vaccine optimism with fresh 34-month highs near 1.4000 against the dollar. The Euro also retreated to 11-month lows below 0.8650.
The UK GfK consumer confidence index improved to a 10-month high of -23 from -28 previously. Retail sales, however, declined 8.2% for January after a 0.3% gain the previous month and well below expectations of a 3.0% fall. The government borrowing data was much lower than expected at £8.8bn for January.
Sterling edged lower after the retail sales data, although the impact was notably muted. Sterling starts the day at 1.1540 against the Euro and a little below 1.4000 against the Dollar.
US initial jobless claims increased to 861,000 in the latest week with last week’s total revised sharply higher to 848,000 from the initial report of 793,000 and well above consensus forecasts of 770,000. Continuing claims declined to 4.49mn from 4.56mn, although this was also above market expectations. There was a decline in pandemic emergency assistance of 1.3mn for the week, but the data triggered reservations over the labour market trends.
Housing starts declined to 1.58mn for the January from a revised 1.68mn the previous month and slightly below consensus forecasts, although building permits surged to 1.88mn, the highest reading since June 2006. The Philly Fed manufacturing index declined slightly to 23.1 for February from 26.5 the previous month, although above consensus forecasts of 20.5. There was also a slight slowdown in the rate of new orders growth while employment increased at a slightly stronger rate. Prices paid increased sharply, but the increase in prices received moderated, easing inflation fears slightly.
The Euro held firm into Thursday’s New York open as the dollar tended to drift lower. ECB minutes from January’s meeting stated that the projected path of inflation continued to be distant from the council’s medium-term aim and that ample monetary stimulus remained essential. The council also reiterated that a temporary inflation boost should not be mistaken as sustainable, but there were some positive aspects with favourable financing conditions expected to prevail for some time.
Euro-zone consumer confidence improved slightly to -14.8 for February from -15.5 previously. The retreated after the claims data, although there was choppy trading as the currency attempted to recover at times. Overall, the dollar edged lower with the Euro just below 1.2100.