Sterling strengthens as retail recovers [Video]

Today's Highlights

• US Dollar weaker on trade tariff news

• Sterling stronger on retail sales recovery

• Canadian Dollar should strengthen if data forecasts are right

Current Market Overview

Sterling had another upbeat day after UK retail sales recovered. The markets were expecting 0.3% growth after last month’s disappointing 0.2% decline, but the actual number was 0.8% growth and everyone said, “Hurrah, let’s buy some Pounds!” Sterling was also boosted by two of the Bank of England’s rate setting committee members voting for a rate hike. That 7-2 voting pattern was at the more bullish end of the forecasts and many now believe a May rate hike is in the offing.

Euro sinks on second wave of disappointing data

The Euro sagged a little today after Eurozone Purchasing Managers’ Indices (PMI) were weaker than forecast. That’s the second month of disappointment and it has started traders and investors talking about whether growth in the currency sharing bloc has peaked already.

US Dollar continues to weaken on trade fears

In spite of the US Federal Reserve raising the base rate, the USD weakened today. That was probably more influenced by the US President’s apparent determination to sack anyone who has been in their post for more than a few hours and to slap trade tariffs on any country that might compete with US businesses. His latest target is China. The president spoke of the theft of intellectual property by Chinese companies and about the need to address America’s massive trade deficit with China. That is all true, but trade wars rarely end without casualties. Share prices around the globe have fallen on the announcement.

China has hit back against the $50 billion of tariffs imposed by the US with a package of $3 billion of tariffs aimed at US goods. Many believe the paucity of the response is because China is trying not to escalate, but it could be that the lack of goods China buys from America makes it hard to single out tariffs.

Canadian Dollar could get good news

There is a smattering of US data today but none is likely to overwhelm the trade war stories. There are two interesting pieces from Canada, though. Both their inflation and retail sales data releases are expected to be much better than last month. Consumer inflation is expected to have pushed up to 2.0% or thereabouts and retail sales are forecast to have risen by 0.9% after a sharp drop last month. The Canadian Dollar could well strengthen on that news.  

Passport blues

And in a move that seems specifically designed to cause offence to brexiteers, the government has awarded the contract to print the new blue British passports to a Franco – Dutch company. It makes commercial sense if the contract will be more cost effective, but what a PR nightmare.