USD Claws Back Gains
It has been a very quiet week on the data front in the UK this week. Even the UK trade balance report which was expected on Wednesday has not been released yet and its daily delay has been due to “quality checks” although it is now due to be announced today. The impact should be limited although the markets are predicting a wider deficit meaning it is more likely the report will be negative for GBP. Next Wednesday is the next big day for GBP as the minutes from this months BoE meeting and jobless claims are released.
In the US, we saw retail sales and jobless claims numbers released which are not expected to alter the Feds tapering commitment. Even though spending was revised lower the previous month, the fact that sales turned positive after two months of contraction is good news for the U.S. economy and should restore demand for U.S. dollars ahead of the FOMC rate decision. The rebound in sales tells us that spending is finally recovering after a brutal winter and will most likely improve further in March. Producer prices and the University of Michigan consumer sentiment survey is scheduled for release today.
Yesterday was a very volatile day for GBPUSD with rates reaching over 1.6750 before USD buyers came in and we have seen it sink below 1.6600 this morning largely as a result of developments in the Ukraine and fears of escalation of East/ West tensions.
The initial optimism over stronger inflation in France and spending in Spain also faded with the rally in the currency. GBP having weakened against the Euro for the previous 5 days, held its ground yesterday after comments from Mario Draghi on the relevance of the valuation of the euro for ECB monetary policy.