Despite the poor UK retail sales released yesterday morning (-0.5% vs 0.4%) Sterling continued to trade above a key psychological level. The hawkish Bank of England minutes drove the currency higher on Wednesday and committee members were unanimous in their feeling that the next rate move would be a hike, with two members still feeling it is a balanced decision. This still being despite the fall to 0% in inflation caused by lower energy prices. The headline that boosted the Pound was that the BoE felt markets are currently pricing in a first hike in Q3 2016, data they feel is behind the curve. With the General Election nearing judgment day and the expectation of a close result growing, investors will welcome this bullish Sterling news, before the volatility caused by the polls emerges.
Yesterday morning a raft of disappointing Eurozone data was released; adding to the poor global manufacturing data. Japan, China, France, Germany and the US all had PMI reports out yesterday that missed expectations whilst China posted a reading below 50, indicating contraction in the second largest economy's biggest industry. The bearish news from the Eurozone yesterday morning caused a quick sell off of the 19 nation currency, before retracing its losses in the afternoon. This was after positive signs surrounding the ‘Grexit’ emerged from German Chancellor Merkel and Greek PM Tsipras’s meeting.
Purchases of new US homes slumped more than forecast in March from a seven year high, a sign that progress in the US housing industry is slowing. Sales dropped to a four month low of 481K against an estimate of 515k. This news was the third piece of poor US figures released yesterday after manufacturing and unemployment claims failed to meet economists’ consensus. The news weakened the greenback against the majority of its counterparts yesterday afternoon.
Today’s docket is again jam packed, we have German Ifo business climate and Eurogroup meetings released this morning. In the afternoon US durable goods are forecast to bounce back into positive territory at 0.2% from last month’s -0.6%.