Headlines
UK retail sales minimally underperform –
BoE rate hike projections unaltered.
GBP/EUR declines as Tsipras resigns –
Calls snap elections on hope of being re-elected.
GBP/USD remains below resistance –
Fed tipped to hike ahead of BoE.
Canadian CPI on tap –
Rise to 1.3% could boost ‘Loonie’.
Sterling
The Pound failed to mount any significant rallies versus its most-traded currency peers yesterday as UK retail sales data came in slightly lower-than-anticipated.
Traders had hoped for 4.4% acceleration in annualised retail sales but the actual result showed that sales remained at an upwardly revised 4.2%. On a monthly basis sales volumes rebounded from a -0.3% fall to expand 0.4% during July. The subdued print did little to alter Bank of England rate hike expectations and traders still expect the bank to wait until after the Federal Reserve has raised rates to tighten monetary policy. With the Fed set to hike in December many analysts anticipate a similar move from the BoE in February of next year.
Euro
The Pound to Euro exchange rate slumped to a 120 pip daily decline yesterday as traders first looked to lock-in profit following the slightly softer-than-anticipated UK retail sales numbers and then as analysts judged that Greek Prime Minister Alexis Tsipras’ decision to step down would ultimately lead to a smoother future for the Hellenic Republic.
The Syriza leader announced that he was stepping down in order to let snap elections take place, which political commentators said was likely a ploy to clean out the hard-line left-wingers among his cabinet and form a new centre-left party capable of leading the nation through the latest bailout package without threat of internal revolt. Despite Tsipras’ almighty U-turn on his pre-election promise to rid Greece of the troika and its crippling austerity measures he still retains a strong majority among the electorate due to his perceived doggedness and willingness to stand up to European creditors during negotiations.
Although the resignation throws up another cloud of uncertainty the knee-jerk reaction among markets was that it would ultimately allow for a smoother path going forward and this helped drive the single currency higher across the board.
US Dollar
Sterling failed to capitalise on the recent downturn on Federal Reserve rate hike bets yesterday as British data failed to impress. The Pound plunged by around 70 cents following the publication of the retail sales numbers but clawed back its losses later in the day.
US jobless claims rose unexpectedly from 273,000 to 277,000 and an index of leading indicators fell from 0.6% to -0.2%, which impacted demand for the ‘Greenback’ during the New York session but did not give GBP/USD the sufficient impetus to rise above a longstanding key psychological resistance barrier.
This afternoon’s US manufacturing PMI report is predicted to print at 53.8; anything above that could support the US Dollar whilst anything below could compromise demand for the ‘Greenback’.
Canadian Dollar
The Pound to Canadian Dollar exchange rate continued to appreciate on commodity concerns yesterday but Sterling stopped 16 pips short of striking a fresh six-and-a-half-year high against the ‘Loonie’.
Later today a report into the Canadian economy is expected to show that retail sales slowed from 1.0% to 0.2% during June, whilst another is anticipated to convey a relatively optimistic uptick in consumer prices from 1.0% to 1.3%. If the inflation report does in fact rise to 1.3% then it will likely overshadow the retail numbers and help drive a bout of profit taking in favour of the ‘Loonie’. However, a lower-than-expected CPI print could easily lead to a new multi-year low for the North American currency.
Australian Dollar
Sterling remained close to a new six-year high against the Australian Dollar yesterday. The Pound may have rallied had domestic data impressed but with the retail report printing slightly below consensus traders saw little reason to drive GBP/AUD higher during yesterday’s session.
The Pound softened by around a cent against the highly volatile New Zealand Dollar yesterday as profit taking stances allowed the ‘Kiwi’ to appreciate following the slightly underwhelming UK retail sales report.
Data Released Today
09:30 GBP Public Sector Net Borrowing (Pounds) (JUL)
13:30 CAD Consumer Price Index (YoY) (JUL)
13:30 CAD Retail Sales (MoM) (JUN)
14:45 USD Markit Manufacturing PMI (Aug P)