UK festive sales disappoint and Euro focus on ECB
British retailers suffered from disappointing sales last month as the tough economic conditions limited consumer spending in the run-up to Christmas. The British Retail Consortium reported the total value of goods was up just 1.5% from December 2011. With inflation currently running at 2.7%, this suggests that retailers sold less in real terms, increasing concerns the economy may have contracted in the last quarter of 2012.
In the eurozone, the key focus is the ECB meeting on Thursday. While no changes in rates or policy are expected, the December minutes announced a measurable downgrade of growth estimates for 2013. In addition, President Draghi kept the door open to the possibility for further cuts, even though he emphasised that the announcement of the Outright Monetary Transactions scheme was having more significant effects than a small cut in rates would have.
On the FX markets, GBP/USD settled the session in minor positive territory after intraday option expiries at 1315GMT and 1500GMT prompted broad based USD weakness. In terms of UK related commentary, ahead of the upcoming MCP meeting, the Sunday Telegraph wrote that the Bank of England’s rate-setters will hold off on further aid for the recovery this week despite the threat of another slump looming over the economy. In terms of technical levels, supports are seen at 1.6022/10 and then at 1.5988. On the other hand, resistance levels are seen at the 21DMA line at 1.6161 and then at the 21DMA upper Bollinger level at 1.6294.