UK retail sales likely to show drop in sales

Today's Highlights

• Sterling volatile as data confuses

• UK retail sales likely to show drop in sales

 

Current Market Overview

The big news from yesterday was of course the vile Westminster murders. Our deepest sympathies go out to everyone affected by such a senseless atrocity. But out of adversity come the images and stories of real people with real humanity doing their utmost to help people they have never met before but will never forget and they too will never be forgotten by those they helped. So one deranged person spreading hate and violence is countered by hundreds of people helping strangers in any way they can. That's why these murderous morons will never win.

Back in the markets, the Pound had been trading upwards across the board for most of the morning but was aggressively sold off as risk aversion swept the currency markets. There was no clear reason for the sell-off in global equities. The GBP then dipped again after the first reports of the terror attack but did recover from these earlier losses; pushing up to a one month high against the USD and Euro. Data from the UK has been relatively good and investors are looking to today's Retail Sales report to confirm the improvements. However, with wage growth slowing, inflation on the rise and confidence waning, this number could disappoint.

Having cut rates 3 times last year, the Reserve Bank of New Zealand (RBNZ) late last night left rates on hold at 1.75% as expected. So no surprises here. The central bank once again reiterated that the NZD needs to fall further to balance growth and monetary policy needs to remain accommodative for a considerable period of time. They also see inflation rising in the months ahead. Governor Wheeler believes inflation will return to the medium term average level and felt the weak Gross Domestic Product (GDP) numbers experienced in Quarter Four was in part due temporary factors. As a result the RBNZ has grown less dovish at recent meetings.

It's a busier day today - we have German Consumer Confidence in the morning followed by UK Retail Sales at 10.30 GMT. This is expected at 0.4% month-on-month. This will be watched closely with Bank of England MPC member Broadbent also due to deliver a speech. A dovish tone from Broadbent and a third successive weak Retail Sales report would undermine Sterling and its recent gains.

In the afternoon, we have US unemployment claims expected at 240k and then Federal Reserve (FED) Chair Yellen is speaking. Assuming she comments on monetary policy, Fed officials may feel compelled to clarify the central bank's stance on interest rates following the USD recent sell-off.