Greek concerns continue to hit euro; end of the month could be key

• UK retail sales up 3.2% year on year, ahead of expectations

• Fitch affirms US ‘AAA’ rating with stable outlook

• Fed’s Williams adds to the noise around rate hikes

• Bank of Japan watches for impact of strong dollar

Sterling bounces on polls and retail sales

There was better news for sterling yesterday as we saw a reasonable bounce from the recent lows at 1.4560, with the pound finishing the day at 1.4675 against the dollar. This was partly on the back of USD selling and was also helped by a poll showing the Conservatives getting ahead – though most continue to show a very close race. The positive news continues this morning with British Retail Consortium retail sales showing a sharp uptick, though these numbers are flattered by pre-Easter trading falling earlier in the year.

The focus for the day will be the inflation rate for March, with a reasonable chance that we see the scales tip into deflation with a year on year rate of -0.1%. This will continue to be explained away as a result of the fall in oil prices and increase in sterling strength, but in any case will stay the Bank of England’s hand for some time to come.

Greek concerns rule

In a morning short on data and rhetoric, US dollar buyers have focussed their attention back onto Greece and we saw the euro on the backfoot, dropping close to 1.05. There was a story in the German newspaper, Bild, suggesting that Greek Prime Minister Tsipras is considering calling for a new election, depending on ongoing negotiations. It looks like 24th April is becoming the final deadline to have an agreed plan from Greece and Tsipras may be looking to strengthen his hand by seeking further support from the people.

There were also reports in the FT that Greece is preparing to take the dramatic step of a debt default, which would come at the start of May with USD2.5 billion due to the IMF - though there would then be a 30 day grace period. This report was summarily denied by Greece. It is an interesting lesson in political brinksmanship, which I for one hope has a good result in the end. With European industrial production out this morning, the Greek situation is likely to have the largest impact.

More central bank noting of US dollar strength

We had a further Federal Reserve member, Williams, commenting yesterday on the rationale for keeping rates low for longer, and that fact that this is dissipating given the improvements in the economy and labour market. There were comments from a European Commissioner on the current EURUSD rate being reasonable and reflective of current rate environments. In a piece from the Bank of Japan minutes, they considered the strength of the US dollar as a reason not to enter into further easing.

Elsewhere, we have US retail sales and producer prices. Given the better data readings over the past week, I would expect an improvement in this figure, which should also be helped by improving weather between the two periods.

Have a great day!