UK retail sales buoyant in run up to Black Friday
The UK retail sales data beat expectations with a 1.9% increase for October which pushed the annual increase to 7.4% – the strongest annual rate since 2002. The data is likely to have been distorted by seasonal factors, but it did reinforce confidence in the near-term UK growth outlook which will help support overall growth trends.
The underlying concerns surrounding Brexit risks are currently being negated by Trump’s previous praise for Brexit and comments that the UK would be at the front of the queue when it comes to trade deals. The direct positive economic effect of increased trade between the US and UK adds pressure on the EU in relation to the Brexit negations, which might reduce the risk of a “hard” Brexit.
The Pound again found support holding it above 1.2400 against the Dollar, and peaked just shy of 1.1700 against the Euro.
In testimony to Congress, Fed Chair Yellen remained optimistic on the economy with forecasts that inflation would rise to the 2% target. Yellen added that an increase in rates may be necessary fairly soon. The headline US CPI increase was in line with expectations at 0.4% for October which pushed the annual rate to 1.6% from 1.2%.
US Jobless claims reached its lowest reading for 43 years, with a decline to 235,000. There was also a stronger than expected reading for housing starts and a solid Philadelphia Fed manufacturing survey for November which suggested firm growth. Against the Euro, the Dollar continued to gain strong ground following favourable CPI data meeting expectations.
Eurozone annualised inflation figures met consensus, but the monthly figure registered a 0.2% decline from previous data. The Euro was initially able to gain ground against the Dollar, but was unable to sustain the gains after the US market opened. The tone of the European Central Bank (ECB) minutes was generally dovish with a focus on low inflation risks, maintaining expectations of further stimulus measures. Euro sentiment remains generally weak.
Data to watch: 7am EUR Producer Price Index (MoM) (Oct), Producer Price Index (YoY) (Oct), 8.15am EUR ECB President Draghi’s Speech , 10:30am EUR German Buba President Weidmann speech 3pm USD CB Leading Indicator (MoM) (Oct).