Mar 24 • Morning Roll Call • 1867 Views • Comments Off on MORNING ROLL CALL

Sterling rises after UK retail sales data beats forecasts, gold gives up some recent gains, USA equities sell off due to lawmaker impassebetween-the-lines1

The Eurozone’s consumers appear to be in confident mood, judging by the latest survey as the latest consumer confidence figure compiled by Eurostat came in at -5, beating expectations of -5.9 and ahead of the previous reading of -6.2. Not to be outdone by the distant cousins they’ll soon be divorcing, UK consumers appear to have brushed aside the recent rise in retail prices, in order to indulge in their favourite leisure pastime; shopping.

Retail sales in the UK beat forecasts, according to data revealed on Thursday, coming in up 3.7% higher versus Feb 2016 and up 1.4% on the previous month. However, caution was advised by various analysts, pointing out that on a smoothed three month basis, sales are down 1.4%, versus the quarter ending November. What’s more, the quarterly fall represented the worst performance since November 2010, when the UK was (apparently) just exiting recession. But with retail prices rising by 3.2% YoY and petrol up by 18% annually, it might be premature to determine a trend based on one month’s data.

Undeterred, FX traders and investors took the retail bounce data as positive news, given that the Brexit starting gun is about to be fired and duly sent sterling up versus the majority of its peers. GBP/USD peaked shortly after the ONS data release to reach 1.2532, giving up some gains to end the day up approx. 0.8%, at circa 1.2518. Sterling also rose versus: euro, Loonie, Swissie and yen, but saved its largest gain versus the Aussie dollar; GBP/AUD ending the trading day at circa 1.6407, a major reversal since printing 1.5900 on March 15th. Investor appetite for sterling long positions will be severely tested next week once Article 50 is invoked, signalling the beginning of the process leading to the UK’s departure from the European Union. Many investment bank economists are predicting a fall (in the medium term before the final exit) of 1.20 for GPB/USD and 1.15 as the floor, if the UK economy suffers immediate contraction before the final exit.

Other notable economic calendar news came courtesy of the USA, with weekly unemployment claims unexpectedly rising to 258k, missing the forecast of 240k. Claims have now risen approx. 15% in a month. New home sales smashed expectations of a 1.6% rise in Feb, coming in up 6.1%.

The DJIA fell by 0.02%, the SPX by 0.11% and the NASDAQ by 0.07% on Thursday. Investors became concerned regarding the Trump administration’s future ability to push legislation through congress, as the health care reform bill failed to pass through Congress. In Europe the main equity markets enjoyed a positive day; STOXX 50 up 0.92%, FTSE up 0.22%, DAX up 1.14% and the CAC up 0.76%.

WTI oil fell once again, closing out the day at circa $47.212 per barrel, down circa 1%. The slight technical bounce enjoyed yesterday, despite record stockpiles being announced, failed to gain support and momentum. Gold slipped by circa 0.4% on the day, finally arresting its six day advance, closing the day out at approx. $1245 per ounce.

The dollar spot index was close on flat after enduring six days of losses, EUR/USD ended the day marginally weaker by 0.1% at circa 1.078. USD/JPY threatened to fall below 110.50 at one point during Thursday’s trading sessions, to end the day at approx. 110.96, a significant reversion since the 115 reached as recently as March 13th.

Economic calendar events for March 24th, all times quoted are London (GMT) time.

07:45, currency impacted EUR. French Gross Domestic Product (YoY) (4Q F). The final reading for France’s GPB will be observed closely, the forecast is for no change at 1.2%.

08:30, currency impacted EUR. Markit/BME Germany Composite PMI (MAR P). There are three PMIs for Germany released on Friday: services, manufacturing and the composite. The composite is forecast to fall marginally to 56.0, from 56.1 previously.

09:00, currency impacted EUR. Markit Eurozone Composite PMI (MAR P). Similar to Germany, there are several European PMIs published on Friday, the prediction is for a slight fall in the composite reading to 55.8, from 56 previously.

12:30, currency impacted CAD. Consumer Price Index (YoY) (FEB). Canada’s inflation is excited to remain unchanged at 2.1%.

12:30, currency impacted USD. Durable Goods Orders (FEB P). USA durable goods orders are expected to have fallen to 1.2%, from 2.0% previously.


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