GBP underperforms after the weakest spending growth since 2013

Much of today’s price action has been dictated by movements in the greenback, with the USD spending the day in negative territory. As European participants came to market, USD softened to see the DXY trade lower by around 0.5% amid no fundamental news with price action in EUR/USD magnetised by the looming option expiry at 1.1000 level (1.9bln). The USD did see a brief period of reprieve after US Initial Jobless Claims printed their lowest level since November 1973 (255K vs. Exp. 278K), however this was not sustained after the Wall St. open with weakness in equities weighing on the USD, with questions remaining as to whether the economy is strong enough to see equities thrive in the case of a rate hike.

The USD weakness filtered through to strength in most major pairs, however GBP underperformed today to pare back much of the recent gains inspired by talk of a rate hike being closer than it previously has been and the BoE minutes suggesting some members thought there was a `fine balance` in the decision as to whether to hike rates. The GBP weakness came as UK retail sales printed lower than expected, with Y/Y spending growth the weakest since Q2 2013 (UK Retail Sales Ex Auto Fuel Y/Y 4.20% vs. Exp. 5.10%).

Elsewhere, NZD initially strengthened after the RBNZ cut the OCR by 25bps to 3.00% as expected, which supported the currency as markets were one-sided heading into the decision, while the central bank also omitted its statement that the currency was at an unjustifiable level.

Looking ahead, tomorrow sees Manufacturing and Services PMIs from France, Germany, Eurozone and the US with Manufacturing PMIs also due out from Japan and China and comments expected from BoE’s Haldane.