Sterling slides as retail sales puncture rate speculation

Yesterday’s markets

24th July 2015

  • UK Retail Sales m/m: -0.2%
  • CAD Core Retail Sales m/m: 0.9%
  • US Unemployment Claims: 255K
  • NZD Trade Balance: -60M

Sterling moved onto the back foot yesterday as UK retail sales fell unexpectedly by 0.2% in June, after consumers bought fewer household goods and less food and petrol. Meanwhile, the annual rate of sales growth slowed to 4.0% last month from 4.7% in May. That was the slowest annual growth rate since September 2014 and was below analysts' forecasts. In the past couple of weeks, expectation have grown about an early hike in interest rates following on from comments from BoE Gov. Carney and yesterday’s hawkish minutes. The concern now will be that growth could slow as consumer spending makes up a large part (upwards of 70%) of GDP. Sterling fell by over a percent against the Euro and half a percent against the US Dollar.

Meanwhile, US data continued its positive trend as U.S. jobless claims hit its lowest level since 1973, suggesting the labor market maintained a sturdy pace of job growth in July. The market will be keen to see if the trend continues next week before next month’s key non-farm payrolls. Other data on Thursday also offered an upbeat assessment of the economy. A gauge of future economic activity increased solidly in June and another measure suggested growth picked up slightly last month. Fed officials meet next week, but they are not expected to tighten monetary policy before September but it will be key to decipher the comments.

Today’s markets

23rd July 2015

  • French Flash Manufacturing PMI
  • German Flash Manufacturing PMI
  • US Flash Manufacturing PMI
  • US New Home Sales

Looking ahead to the final trading session of the week, the purchasing managers (PMI) data comes into focus today from several region in both manufacturing and service sectors.  French, German and Eurozone PMI are due from both the service and manufacturing sectors. Meanwhile the US manufacturing PMI is set for release along with the new home sales.