Sterling
The Pound rallied yesterday in reaction to the highest UK retail sales print since 2002. Splurges on Halloween goodies and winter clothes to combat the onset of the cold weather helped to drive the annualised retail figure up from 4.0% to a whopping 7.6% in October. Meanwhile, the monthly score outpaced forecasts of 0.4% with a robust reading of 2.0%. The sparkling report showed, once again, that the prospect of ‘Brexit’ has not taken any of the life out of Britain’s busy shoppers. Demand for Sterling increased following the 14-year high figure.
Euro
The Pound to Euro exchange rate touched a two-month high yesterday, rallying over half a cent, as markets responded positively to a report showing that British retailers witnessed their fastest month of sales growth since 2002 in October.
Data across the Channel showed that Eurozone consumer prices rose 0.5% in October, up minimally from the 0.4% increase in September. However, demand for the single currency remained fragile as investors hedged against the possibility of nationalist populist parties gaining support in Europe following this year’s shock political events. The fear is that anti-EU sentiment could have been galvanised by victories for nationalist agendas in the UK and the US, which poses a threat to the future of the single currency.
US Dollar
Sterling struggled to make any meaningful gains versus the US Dollar yesterday as upbeat British sentiment, surrounding the 14-year high retail sales score, was met by hawkish comments from Federal Reserve Chairwoman Janet Yellen. The Fed President noted that leaving rates low for too long could encourage ‘excessive risk taking and ultimately undermine financial stability’. The general tone of Yellen’s statement suggests that a December rate hike is on the cards, corroborating market bets, which point to a 90% chance of tighter policy next month.
Data wise: US inflation remained at 1.6%, as expected, jobless claims tumbled from 254,000 to 235,000 and housing starts rebounded from a -9.0% contraction in September with a bumper +25.5% expansion in October – all of which supported the consensus view of a Fed hike next month.
Canadian Dollar
The Pound appreciated by around 70 pips versus the Canadian Dollar yesterday, buoyed by an exceedingly strong UK retail sales report.
Hopes of a successful OPEC deal to curb oil production and drive prices higher supported the commodity-correlated ‘Loonie’ yesterday, however, the hawkish tone of Fed Chairwoman Janet Yellen’s latest comments on monetary policy weighed on demand for the North American currency.
Later today data is expected to show that Canadian consumer prices rose from 1.3% to 1.5% last month, which could give the ‘Loonie’ a little bit of a boost.
Australian Dollar
The Pound to Australian Dollar exchange rate jumped by around 150 pips yesterday as robust UK retail data bolstered the appeal of the Pound. Down under, the ‘Aussie’ was hurt by an underwhelming labour market report, which showed a gain of 9,800 jobs, undershooting expectations of 16,000. The risk-sensitive ‘Aussie’ Dollar was also damaged by the Fed’s apparent willingness to raise rates in December.
New Zealand Dollar
As is often the case, the GBP/NZD graph tracked the GBP/AUD graph pretty closely yesterday. Sterling saw demand rise following a monster retail report, while the New Zealand Dollar suffered from global risk aversion trends related to the Fed’s hawkish rate outlook. Overall the Pound to ‘Kiwi’ Dollar exchange rate rose by around a cent-and-a-half.
Data Released
13:30 CAD Consumer Price Index (YoY) (OCT) High 1.5%