Market Drivers for January 17, 2014
UK Retail Sales 2.6% vs. 0.5% taking cable higher a full cent
China Beige book – credit transmission is broken
Nikkei -0.08% Europe 0.16%
Oil $94/bbl
Gold $1240/oz.

Europe and Asia:
CHF 0.0% vs. 0.2%
GBP UK Retail Sales 2.6% vs. 0.5%

North America:
USD Building Permits/Housing Starts 8:30 EST
USD Industrial Production 9:15
USD U of M 10:00 EST

Cable soared more than a cent in active morning London trade today after UK Retail Sales produced a massive beat indicating that consumer spending remains very strong. UK Retail sales soared 2.6% versus 0.5% eyed pushing GBP/USD through the 1.6450 in frenzied trade.

This was the biggest year over year rise in nearly a decade and the best month over month jump in more than 4 years as Christmas season turned out to be a blockbuster for some retailers. According to the ONS it was the small store owners that did best as their sales grew three times as fast as those of the large retailers.

In the only sour note of the report the 3 month on 3 month sales showed a -0.4% decrease in sales suggesting that all of the gains were backloaded into the Christmas shopping season. It is still difficult to determine whether UK economy is maintaining its growth momentum or whether the Retail Sales figures simply reflect some pent up spent by UK consumers which have suffered stop and go contractionary conditions since the credit crunch of 2008 and are finally enjoying a modicum of wage growth.

In either case today’s data provided a much needed boost for cable bulls and has tempered some of the speculation that UK economy reached peak growth in Q4 of this year. The pair soared to 1.6460 but backed off the highs on reports from the UK statistics office that the Retail numbers may have improperly adjusted for seasonal growth and may therefore have overstated the rise in sales. Still for now the pair remained well bid and longs are likely to press their case further trying to run stops at the 1.6500 as the day progresses.

Elsewhere the price action was considerably more subdued with most of the major currencies tracing out very narrow ranges amidst an empty economic calendar and relatively quiet end of week trade. The one exception was the kiwi which dropped sharply by nearly a cent mainly on short covering from the AUD/NZD cross. The Aussie remained lackluster at 8800 level with traders now awaiting a policy reaction from Sydney after the very weak payroll numbers this week.

In North America the focus will turn to housing and U of M survey later today. The market is looking for a small rise in consumer confidence to 83.4 from 82.5 and an increase could help the greenback get some momentum back after its rally stalled yesterday amidst a decline in US 10 year rates. A downward surprise in consumer sentiment however could send USD/JPY through the 104.00 figure as traders begin to worry that the weak US NFP number was not an outlier but rather a precursor of possible slowdown in US growth.

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