Merkel and bullish retail sales boosts Sterling

Yesterday’s markets

18th November 2016

  • GBP Retail Sales m/m: 1.9%
  • USD Building Permits: 1.23%
  • USD CPI m/m: 0.4%
  • USD Core CPI m/m: 0.1%
  • USD Unemployment Claims: 235K
  • CHF Gov Board Member Maechler Speaks

The UK dominated the morning yesterday posting an incredibly strong set of tertiary sector data which helped to propel the Pound briefly earlier yesterday. Month on month retail sales were forecast at 0.4% but posted a whopping 2.0%, which marks a 30 month high. The yearly figure therefore rose to 7.6%. The bullish numbers suggest that consumers are completely unfazed by the prospect of Brexit and because the UK economy is so heavily biased towards the services sector the data should keep the economy growing as we move forward.

Yesterday, helping to aid the British Pound was German Chancellor Angela Merkel.  Comments made by Merkel yesterday morning suggested a willingness to negotiate, helping to play down talks of a hard Brexit, a driver that has sent the Pound falling lately. Merkel offered “fair” negotiations to the UK saying “The question of when lifelong guarantees come into effect according to the social standard of the host country must certainly be taken into consideration”.

The main focus yesterday was surrounding FOMC Chair Janet Yellen’s testimony. After President-elect Donald Trump’s public dislike for the Fed chair, when asked if she would step aside the reply was ‘No I cannot’ and confirming that her commitment is to her full 4-year term which ends in January 2018.  Fed Chairwoman Janet Yellen did tell the lawmakers that a rate increase could come relatively soon, as inflation and the economy continue to show signs of strength. These comments bolstered expectations that the December meeting of the FOMC will be where the benchmark rate will increase. As a result, the Euro yet again was sold off and hit year lows against the Greenback and looks like this downward spiral for the single currency could be a one way ticket.

Today’s markets

17th November 2016

  • EUR German PPI m/m
  • EUR CB President Draghi Speaks
  • GBP MPC Member Broadbent Speaks
  • CHF Gov Board Member Maechler Speaks
  • EUR German Buba President Weidmann Speaks
  • CAD Core CPI m/m

The last working day of the week begins with the head of the ECB Mario Draghi, speaking early in Frankfurt. As always markets will watch for any clues on possible monetary policy changes.