Headlines
UK retail sales on track for strong year –
4.6% annualised increase in May.
Greek debt talks breakdown again –
1 last crisis meeting called to prevent ‘Grexit’.
GBP/USD hits new 7-month high –
US inflation prints at zero.
GBP/AUD close to 71-month high –
GBP/NZD close to 5-year high.
Sterling
The Pound remained at robust levels versus most of the majors yesterday as British retail sales data printed sanguinely.
Compared to predictions of 0.0%, the Office for National Statistics (ONS) reported that retail sales volumes increased 0.2% in May, which saw the annualised figure hold at 4.6%. The upbeat report leaves Britain on track for its strongest year of consumer spending for over a decade, as rising wages and depressed consumer prices bolster Britons’ purchasing power.
Markets currently anticipate a rate hike from the Bank of England in the first quarter of next year but speculation has intensified in some parts that the central bank could opt to tighten before the end of 2015 if inflation bounces back swiftly in the second half of the year.
Euro
Sterling dipped -30 pips against the Euro yesterday as traders put an extraordinary amount of faith in rumours that Greek finance minister Yanis Varoufakis would present a proposal that was palatable to the nation’s lenders.
However, when it emerged that the new proposal had not gone down well with the institutions – the latest negotiations broke down within just one hour – the single currency gave back its gains and ‘Grexit’ fears swelled once more. Leaders called a crisis meeting on Monday evening but with a record €2 billion withdrawn from Greek banks over the last three days there are fears among some officials that the Hellenic banking system will not be able to hold out until Monday.
The headwinds are growing and Greece looks closer to falling off the cliff and out of the Eurozone with each passing day.
US Dollar
The Pound to US Dollar exchange rate rallied by around half a cent yesterday morning to strike a fresh seven-month high thanks to the slender uptick in monthly UK retail sales.
Across the pond in the United States it was reported that consumer prices stagnated at 0.0% during May, marking an improvement on April’s -0.2% score but disappointing forecasts of a slightly higher +0.1%. Rising prices at petrol pumps contributed to the uptick in consumer prices and analysts predict that food prices will start to increase over the next few months as stores adjust to reflect an eggstraordinary shortage of eggs in some parts of the country.
Although the ‘Greenback’ failed to rally on the news, traders were pleased with a report showing that US real average wages grew by 2.3% last month.
Canadian Dollar
The Pound rallied by a third of a cent to reach a fresh four-month high against the Canadian Dollar yesterday ahead of a couple of key Canadian ecostats due for release later today.
The median market consensus suggests that Canadian CPI will print at 0.8% for May, matching the score registered in April. And traders are also prepared for retail sales to increase at a rate of 0.7% for the second month in a row. Provided the market estimates are correct, GBP/CAD should remain fairly flat on the day. However, if the CPI and/or retail reports print below consensus then we could see Sterling push ahead; if the data beats expectations then we could see the ‘Loonie’ advance.
Australian Dollar
The Australian Dollar rallied by around a cent against the Pound yesterday as markets locked in profit following the 71-month high Sterling struck on Wednesday. Demand for the risk-sensitive ‘Aussie’ was also bolstered a little bit by the Federal Reserve’s latest statement, which featured cautionary language and was seen to reduce the possibility of a US rate hike in September.
New Zealand Dollar
Sterling held onto most of its 600-pip Wednesday gain against the New Zealand Dollar yesterday as markets continued to punish the New Zealand Dollar for its negative rate outlook. The Pound did slide a little bit due to profit-taking stances, but GBP/NZD remains over 1,300 pips higher than it was before the Reserve Bank of New Zealand decided to slash interest rates last Wednesday.
Data Released Today
13:30 CAD Consumer Price Index (YoY) (MAY) High 0.8%
13:30 CAD Retail Sales (MoM) (APR) Medium 0.7%