Negative readings put an end to GBP bull run

Yesterday was a relatively quiet day in terms of higher tier data released from the UK; however, there was an array of middle and lower tier releases contributing to the economic calendar. It’s worth noting that all middle tier data fell short of the consensus readings – with consumer credit (Jan), net lending to individuals month-on-month (MoM) (Jan) and mortgages approvals (Jan) all falling short of the mark. The negative readings put an end to the bullish look that the pound has donned of late and we witnessed some of the recent gains given up. Against the dollar, the pound traded in a 70pip range with highs of 1.5420 (IB) before retreating and posting lows of 1.5351. When play came to a close on the London session, sterling had lost 0.40% against the Greenback. The pound also recorded losses against the bloc currency as the rate retreated away from the recent highs posted last week with lows posted yesterday of 1.3695(IB). Sterling did rally towards the end of the session, recapturing and consolidating above the 1.37(IB) handle. With very little to be released all week from the UK, eyes and ears will be focussed in on key releases from within the bloc and across the pond. We will have to wait until Thursday for the Bank of England interest rate decision and asset purchase facility. If interest rates are kept on hold and there are no change in terms of the asset facility numbers – which is a likely scenario - this could be a non-event in terms of volatility.

In terms of economic releases, the eurozone enjoyed a good day yesterday. Consumer price index core readings met the 0.6% consensus and non-core consumer price index (YoY) (FEB) scored a positive -0.3% reading, up from the -0.5% consensus reading. This positive reading combined with reduced unemployment rate of 11.2% (down from 11.3% last month) put the euro in good stead to claw back some recent losses. Markit manufacturing PMI figures were also released from various nations across the bloc – it’s worth taking note of the fact that the Greek reading was ever so slightly up from what was achieved last time out. Both France and Spain’s results fell short of the consensus, whereas Italian and German readings were positive. The eurozone markit manufacturing figures as a whole fell marginally short of analyst's best consensus. Early this morning both year-on-year and month-on-month retail sales figures were released out of Germany. Both figures were significantly above the consensus readings and, to help bolster the euro further, unemployment change in Spain came in positive with a reading of -13.k against the 10.5k figure. Like the pound, there is fairly little for market participants to get their teeth into in the early stages of this week. The only data worth noting today is German retail sales – both month-on-month and year-on-year. Thursday afternoon brings the highlight of the week in terms of releases with the ECB interest rate decision and the monetary policy statement followed by the press conference. The press conference is likely to bring volatility as participants will monitor comments made very closely.

Much like the eurozone, there was a collection of economic releases throughout the day from the US – ISM Manufacturing PMI (FEB) was the only release considered top tier data and this fell short of the consensus, scoring 52.9 down on the previous result from January. In addition, both ISM prices paid (FEB) and construction spending (MoM) (JAN) were published to show negative readings but the dollar was propped up with Markit manufacturing PMI (FEB) showed positive and likely sustainable growth in the sector with a post of 55.1. As mentioned earlier in the report, the dollar enjoyed small gains against the euro and despite trading in a fairly tight range against the pound, the Greenback also recorded relatively significant gains. As play came to a close, cable traded just above 1.5350(IB). The next major economic release from across the pond is ISM non-manufacturing PMI on Wednesday afternoon and all market participants will be eagerly awaiting Friday's Non-farm payrolls and unemployment rate. A good run of data this week could see the dollar test new lows against the euro and push the sterling exchange rate back towards the crucial 1.50 level.