Step by step

Just a week on from the UK’s third phase of re-opening, coronavirus cases and hospitalisations have remained low. To add to this, the total number of vaccinations have reached over 60 million, with 72% of the population having at least one jab and 43% being fully inoculated. However, the emergence of the Indian variant has unnerved markets in the last week. Despite this, consumer confidence seems to have remained high and as the final stage of Boris Johnson’s road map approaches, optimism does not appear to be waning.

Retail sales data released on Friday showed that for a third consecutive month spending has continued to climb, rising 9.2% in April compared with 5.1% in March. In addition to this, the Gfk Consumer Confidence index rose to pre-pandemic levels indicating the underlying outlook is positive in the eyes of consumers. This feel-good mood has swept through the UK and some economists have suggested that more spending is to come as savings accumulated during the pandemic are happily being spent by consumers. Boris Johnson is scheduled to make a decision by the end of the month on whether restrictions will be eased on 21st June, with some ministers expecting all measures to be lifted, further adding to this increased optimism.  

Bottom line: Spending looks unlikely to slow down in the near term. It is perhaps more a question of where the spending will move to next rather than overall levels decreasing. All restaurants and pubs have been allowed to open, spending could start to move away from retail stores and into places such as pubs, restaurants and cinemas. Once domestic spending in pubs and restaurants has reached elevated levels, cash may move to other areas of the economy such as travel. By which time it is hoped more countries will be on the green list and testing will be more accessible. With spending across the hospitality sector jumping 43% over the last week, it seems this shift may already be under way.

The week ahead


The Pound traded relatively flat against its peers last week but finished in the green for the third week running on its trade-weighted index, peaking at just under 0.2% off year-to-date highs. Last Friday’s stronger than expected Retail Sales and PMI data helped briefly lift GBP/USD above the 1.4230 level for the second time since April 2018. Bank of England members will be speaking throughout the week, starting with Governor Bailey on Monday afternoon. The ECB and Fed continue to follow the rhetoric that inflation is temporary and does not yet warrant monetary tightening, but a different view from the Bank of England could provide some momentum for Sterling during a week which is quiet on the data calendar.

  • Tuesday’s CBI reported sales survey for May is expected to read 28, up from 20 previously.
  • Friday’s Nationwide House Price index is expected to show 9.4% growth in house prices year on year compared to last month’s 7.1% reading.



Despite trading relatively flat last week, the Euro index posted 12-week highs and EUR/USD found resistance at the 1.2245 level which was also reached back in February 2021. The pair begins this week at the 1.22 handle during Monday’s bank holiday across much of mainland Europe and ahead of a relatively quiet week for economic data. Last week, ECB President Christine Lagarde dampened hopes of monetary tightening for the Eurozone, despite data showing strong economic momentum behind the bloc. Lagarde stated that the ECB remains convinced that inflation would ‘return to lower levels’ next year.

  • On Tuesday, German IFO surveys for May are all expected to post improvements from April’s reading, with the Expectations survey forecasted at 101.5 vs. 99.5 previously and the Current Assessment survey forecasted 95.5 vs. 94.1 previously.
  • Thursday’s GfK Consumer Confidence survey for June is expected to read -5.2 vs. April’s -8.8.
  • Friday’s French CPI for May is expected to read 1.4% year on year, up from April’s 1.2% while month on month is forecast 0.3% vs. 0.1% previously.



The Greenback extended its decline last week, briefly breaking below the trade-weighted index’s February 2021 lows to levels not seen since early January 2021. Last week’s release of the Federal Reserve Open Market committee’s April meeting was a highlight as it showed members edging towards tapering bond purchases in the future if the economic data continued to be strong. However, despite recent strong inflation data supporting this rhetoric, April’s labour market data missed the mark, casting doubt over this shift in policy stance. We have several Fed members speaking this week as well as the Fed’s preferred measure of inflation – PCE inflation - released on Friday.

  • Tuesday’s CB Consumer Confidence for May is expected to read 118.9 vs. April’s 121.7.
  • Thursday’s Durable Goods orders for April is expected to remain unchanged at 0.8% growth and US annualised quarter-on-quarter GDP growth is expected to read 6.5%. Initial Jobless claims are expected to tick lower to 425k people claiming unemployment vs. last week’s 444k.
  • Friday’s Personal Spending for April is expected to read 0.5% growth vs. March’s 4.2% growth while Personal Incomes are expected to show -14.8% growth after growing 21.1% in March which was supported by US stimulus check payments.
  • Also on Friday, the Fed’s preferred measure of inflation, PCE Inflation, for April is expected to read 3.5% year on year, up from 2.3% previously and 0.6% month on month up from 0.5% in March. Friday’s MNI Chicago PMI for May is forecasted 69.0, down from 72.1 in April while the University of Michigan Sentiment survey for May is expected to read 83.0, up from 82.8 previously.



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