GBP Looks to Retail Sales for Direction

GBP/USD hit new 2018 lows yesterday and eyes a possible pick-up in Retail Sales today. ECB meeting accounts are also in focus.

Previous Day's Market Highlights

Sterling fell to new 2018 lows against the dollar yesterday after UK CPI data showed that inflation softened further in April, falling to 2.4% from 2.5% in March. Economists had expected inflation to hold steady at 2.5%. Softening inflation pushes back interest rate hike expectations. Pressure on the sterling-dollar rate continued throughout the morning, ultimately seeing a new low around 1.3305.
 
Ongoing dollar strength combined with euro weakness after Eurozone PMI data disappointed and given concerns over populist Italian politics, led to euro-dollar hitting a new 2018 low below 1.17. Sterling-euro regained 1.14.
 
The Fed meeting minutes left the door open for a rate hike next month, as is widely expected, but may have disappointed some investors who had been hoping for stronger signals that interest rates might have to rise more quickly than previously expected. The dollar lost ground against the euro and the pound around the release of the minutes.
 
Overnight, New Zealand trade data surprised to the upside, which strengthened the kiwi dollar.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1403 1.1520 1.1302 1.89%
GBP/USD 1.3361 1.3999 1.3305 4.96%
EUR/USD 1.1717 1.2211 1.1675 4.39%
GBP/AUD 1.7668 1.8476 1.7656 4.44%
GBP/NZD 1.9313 1.9755 1.9247 2.57%
GBP/CAD 1.7165 1.7985 1.7122 4.80%

Today's Market Highlights

A pick-up in Retail Sales after the previous month’s decline could strengthen the poundthis morning (09:30 BST). An improvement here would mark one of the few positive prints amongst a recent batch of largely disappointing data. Markets will also parse comments from BoE Governor Carney and Fed Member Dudley at the BoE’s Markets Forum in London for any additional monetary policy clues.
 
On the euro side, investors will keep an eye on comments from the ECB’s Praet, who speaks twice, and on the ECB meeting accounts (12:30) for any further insight into the ECB’s economic and inflation outlook and the timing of the next policy steps.
 
In the afternoon, the US releases weekly Initial Jobless Claims, likely to be little changed, and Existing Home Sales, which could be a slight threat to the dollar. BoE Governor Carney speaks this evening at the Society of Professional Economists’ annual dinner (17:00).

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Retail Sales MoM (Apr) 0.7% -1.2%
09:30 GBP Core Retail Sales MoM (Apr) 0.4% -0.5%
09:30 GBP Retail Sales YoY (Apr) 0.1% 1.1%
09:30 GBP Core Retail Sales YoY (Apr) 0.1% 1.1%
09:30 EUR ECB's Praet Speaks
11:30 EUR ECB's Praet Speaks
12:30 EUR ECB Monetary Policy Meeting Accounts
13:30 USD Initial Jobless Claims (18 May) 220K 222K
14:00 USD Housing Price Index MoM (Mar) 0.5% 0.6%
15:00 USD Existing Home Sales MoM (Apr) 5.57M 5.60M
15:35 USD Fed's Bostic Speaks
18:00 GBP BoE Governor Carney Speaks
19:00 USD Fed's Harker Speaks

Caxton