UK retail sales slip as hospitality reopens
The UK retail sales came in at -1.4% over the month in May vs. 1.6% expected and 9.2% previously. The core retail sales, stripping the auto motor fuel sales, stood at -2.1% MoM vs 1.5% expected and 9.1% previously.
The largest contribution to the monthly decline in May 2021 came from food stores where sales volumes fell by 5.7%; anecdotal evidence suggests the easing of hospitality restrictions had an impact on sales as people returned to eating and drinking at locations such as restaurants and bars.
GBPUSD now falls below the 1.40 benchmark and targets new support at 1.3850 – It has already rebounded higher so make sure you are ready for more volatility throughout the day.
EURUSD is oversold
Forex trading is 24/5, not 24/7. Investors will likely take dollar profits and clear positions ahead of the weekend. After such a sharp move – atypical for EURUSD in recent months – there is room for an upswing. Moreover, markets may begin looking ahead and remember that the Fed is not the only game in town. Europe’s rapid vaccination rate is a plus for the common currency.
It is worth recalling that the Fed stunned investors on Wednesday and brought forward its projections for the first post-pandemic interest rate hikes. The so-called dot plot pointed to two rate hikes by the end of 2023 against March’s projection for no increase until 2024. Personally, this feels like the US have jumped the gun and may haunt them in the coming weeks. For now, if you are looking to sell some US Dollars then make the most of the move and go into the weekend feeling awesome!
Snapshot of market influences
* UK Chancellor Sunak rules out extension of business support despite delayed reopening.
* The UK economy is set to return to pre-Covid levels by the end of 2021, a year earlier than expected, the CBI has predicted, expecting the economy to grow by 8.2% this year and 6.1% in 2022.
* British inflation can rise above 3% before the Bank of England feels discomfort, according to a Reuters poll of economists.
* The EU is preparing to agree to a three-month extension when Britain can send processed meat to Northern Ireland in an attempt to avoid a “sausage trade war”.
* Armin Laschet, the front-runner to succeed Angela Merkel as chancellor, called for the reinstatement of European Union budget rules once the pandemic is over.
* Italy PM Draghi is seeking to improve and streamline Italy’s vetting of foreign takeover bids at a time of heightened competition between China and western countries — and he wants to wield more power in the oversight process.