UK retail sales down – Olympics to blame
Retail sales in the UK fell 0.2% in August as people put off shopping to watch the Olympics, according to the Office for National Statistics (ONS). On balance, retail sales held up well during the summer as shops discounted sharply to lure customers and the decline was mainly driven by a fall in online sales. Analysts said the weak overall sales figure underlined persistent worries over the strength of the economy. The British Chambers of Commerce on the other hand stated that the smaller-than-expected monthly fall (markets had been expecting a fall of 0.4%.) and the year-on-year increase in retail sales supported the view that GDP would return to positive growth in the third quarter, although the pace of recovery would remain modest.
According to the eurozone PMI surveys, Activity among eurozone firms suffered its steepest contraction since June 2009. The (PMI) Composite Output Index fell to 45.9 in September, the lowest for 39 months, from 46.3 in August. The composite figure combines services and manufacturing activity and a figure below 50 indicates contraction. The results indicated the eurozone was heading back into recession.
A corrective mood on the markets set in yesterday after disappointing figures from China. The flash PMI manufacturing measure for China had indicated another fall in output in the sector, adding further to eurozone woes. Investors interpreted this latest release as depicting a Chinese economy that is still decelerating and indeed, has been for almost twelve months.
The economic calendar is relatively uneventful in European hours and the US docket is outright empty, hinting broad-based sentiment trends are likely to remain in control of FX market price action. EUR/USD is trading around the $1.30 threshold and Sterling is pushing against the dollar towards 1.63, highest level since April.
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