GBP dips on worst retail survey in 29 months
The Confederation of British Industry published its monthly retail sector survey yesterday and it didn’t make for pleasant reading. At minus 44, the figure was the worst since March 2021 and well below the minus 25 reading in July. The section of the survey that deals with forward expectations was slightly improved from the previous month but still very much in negative territory. That was -21 in August, up from -32 in the previous month. This should really come as no surprise. Inflation across the board has been excessive over the last year and employers are struggling to keep pace with wage increases. It follows that if you have less money in your pay packet compared to the pace of inflation you are likely to spend less. Sterling dropped by 1.5 cents against the US dollar to this morning’s $1.2575 and by half a cent against the euro to €1.1655. There were falls in the value of the pound elsewhere too. GBP/AUD is down below AUD 1.96 and GBP/NZD is still elevated but off its highs at NZD 2.13. No UK data today but some from the other side of the Channel and the Atlantic to keep traders entertained. It is also worth remembering that the UK is closed for business on Monday, so traders may well be shutting positions down ahead of the long weekend. The rest of the world will be trading on Monday and speculative traders will not want to be caught out. So be prepared for increased volatility towards the latter part of the day
German economy stagnates in Q2
A recession is defined as two consecutive quarters of economic contraction. That is what Germany suffered in the last three months of last year and the first three months of 2023. The second quarter of 2023 showed zero growth. You could see that as an improvement but the markets were a tad more sceptical and the euro stopped in its tracks after that data was released this morning. The EUR/USD rate is down to $1.0785 at the time of writing and the GBP/EUR rate is hovering around €1.1650. This morning will bring German business sentiment indices from the IFO Institution and at noon the president of the European Central Bank, Christine Lagarde will be speaking. As you can imagine, further volatility cannot be ruled out.
US traders watching Jackson Hole
The US dollar has picked up some buying interest in the last 48 hours ahead of the speech by the Chairman of the US Federal Reserve scheduled for this afternoon. Jerome Powell will be speaking at, what is described as a central banker conclave in Jackson Hole, Wyoming. It has to be expected that that will be a lot of speculation surrounding any secretive meeting of central bankers but the general consensus seems to be that Chairman Powell will continue to hint at further interest rate hikes and nobody is expecting him to call an end to that cycle at this meeting. The GBP/USD rate is down to $1.2575 and the EUR/USD rate is down to $1.0785 in the interbank markets. It is worth reiterating the fact that UK traders will not be operational on Monday. That takes 40% of the volume out of the foreign exchange market. Hence, late trading today and trade through Monday is likely to be volatile. But presents opportunities for automated orders, especially for those in the UK who will not be watching the markets on Monday.