Strong UK Retail Sales data helps boost the Pound

• Post FOMC rally stalls.

• BoJ hold rates, reversing recent Yen gains.

• Strong UK Retail Sales data helps boost the Pound.

The post FOMC rally appears to be flagging according to European markets, with stocks giving back some of the gains seen yesterday. The Fed’s decision to cut rates by 50-basis points has been warmly welcomed by markets, with the bank shifting towards a pro-growth stance after years of blindly trying to drive down price pressures at all costs. While markets will undoubtedly enjoy an underlying feeling of optimism that the data will gradually start to improve, the Q3 earnings season and US election do provide a potential reason for markets to adopt a more cautious approach. 

The Bank of Japan completed the trio of central bank meetings, replicating the rate pause seen by the BoE yesterday. However, the commentary from Ueda set a more pessimistic tone for yen traders, with the Governor noting that upside inflation risks had eased of late. While the bank remains on a path to higher rates, these comments highlight the potential for a lower terminal level for Japanese rates. With the yen having been one the of best performing currencies of recent months, the weakness we are seeing this morning will be a brief pause in the recovery story.

UK retail sales data helped bolster confidence in the direction of travel for the UK consumer, with both headline and core metrics beating estimates. Notably, this represents a continuation of the recent recovery in the amount of goods being purchased, with the trend of paying more for less finally behind us. Despite this, UK stocks have found themselves on the back foot in early trade, losing traction after a pop in the pound this morning.