Sterling selloff on Brexit standoff
UK retail sales grew by 0.9% in January, beating forecasts of 0.7% growth and December’s figure was revised to -0.5% from 0.6% originally stated. Core retail sales, excluding fuel, grew 1.6% but the annual increase was held to 1.2% after the run of weak data in the last half of 2019. CBI industrial orders improved slightly to -18 for February, up from -22 the previous month but still below the long-term average. Exports orders increased to a 6-month high and manufacturers expect output to increase slightly over the next few months, although underlying sentiment was still fragile.
The Pound rose immediately following the retail sales data but then lost ground continuously throughout the day with markets concerned by UK/EU trade tensions. Sterling dipped to 3 month lows near 1.2850 on the Dollar and slipped below 1.1905 against the Euro. Sterling has attempted a recovery at the open this morning but is still held below 1.2900 as we await PMI business confidence data.
The US Philadelphia Federal Reserve (Fed) manufacturing index strengthened sharply to a 33-month high of 36.7 for February from 15.1 previously and well above consensus forecasts of 12.0. New orders strengthened to 33.6 from 16.7 and unfilled orders also returned to expansion. Employment indices were mixed while prices received increased at a slightly faster pace. Companies were also more optimistic over the 6-month outlook. Initial jobless claims increased slightly to 210,000 from 206,000. The flash EU consumer confidence reading improved to -6.6 for February from a revised 8.1 previously.
The Euro against the Dollar was unable to derive any support from the data as Fed Vice-Chair Clarida stated that the US fundamentals are solid and lower trade tensions should be positive for investment. The dollar overall maintained a strong tone on expectations that the economy would out-perform other major economies.
According to minutes from January’s ECB meeting, data points to positive but modest growth ahead, but additional data is needed to see if signs of stabilisation provide firmer ground for optimism. Members were encouraged by the fact that headline and underlying inflation had evolved in line with projections with an upward trend in some inflation indicators.
The flash EU consumer confidence reading improved to -6.6 for February from a revised 8.1 previously, but the Euro was hampered to some extent by a political row over the EU budget. The common currency was unable to derive any support from the data Fed Vice-Chair Clarida stated that the US fundamentals are solid and lower trade tensions should be positive for investment. The currency index advanced to fresh 3-year highs with the Euro testing fresh 34-month lows near 1.0780. There is little change this morning with the Euro trading just above the 1.0800 figure.
Data to watch
08.15 EUR – French Flash Services PMI
08.15 EUR – French Flash Manufacturing PMI
08.30 EUR – German Flash Services PMI
08.30 EUR – German Flash Manufacturing PMI
09.30 GBP – Flash Manufacturing PMI
09.30 GBP – Flash Services PMI
14.45 USD – Flash Manufacturing PMI