Dovish BoE and poor US retail sales boost the Pound

  • CNY Industrial Production
  • EUR Prelim GDP
  • GBP Avg Earnings
  • GBP Claimant Count Change
  • GBP Carney Speaks
  • BoE Inflation Report
  • USD Core Retail Sales
  • USD Retail Sales

Yesterday’s docket was dominated by the UK economy and the Bank of England as a raft of key labour data hit the wires and Mark Carney’s quarterly inflation report was released.

Firstly, labour data from the UK impressed economists’ with the unemployment rate decreasing to 5.5% and average earnings exceeding the consensus and rising to 1.9%. Sterling appreciated after this news as expectations on an earlier than forecast interest rate rise increased.

The Bank of England inflation report followed shortly after. The tone from BoE Governor Carney was slightly dovish, leading the Pound to retrace its early morning gains. The BoE cut its forecasts for economic growth over the next three years and cautiously backed bets in financial markets that it will only start to raise interest rates in around a years’ time. The BoE now forecast growth this year of 2.5% which has been revised lower from the previous 2.9% projection in February.

US retail sales failed to meet market expectations yesterday afternoon, posting a bearish 0%. Instead of spending the increase from lower oil prices and rising employment, households continue to save. The poor reading casts doubts on how soon the Federal Reserve policy makers will be able to raise interest rates. The Fed have stated that they need to be convinced that growth is gaining momentum before risking an increase in their main benchmark rate and with the tertiary sector (which accounts for roughly 70% of US growth) struggling, this could further delay that decision.

  • USD Unemployment claims
  • EUR Draghi speaks

Today’s docket is relatively light in terms of data. US unemployment claims are released this afternoon and are forecast to increase on last week’s bullish 265k. US PPI is also due to worsen on the previous reading. Finally, the Eurozone powerhouse Germany takes a day off in observance of Ascension day.