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August 2016

Upbeat UK retail sales boost Sterling

Published: Friday 19 August 2016

  • Upbeat UK retail sales boost Sterling
  • Canadian data rules the afternoon 

As soon as the improved UK retail sales were released yesterday, the Pound gained a cent against most other currencies. It came after a series of surprisingly good data releases and reports which all suggest the hype over the Brexit vote and its repercussions haven’t been reflected in consumer sentiment. As I have always believed, if the government wants to boost the economy, give cash to consumers and they will consume. That drives production and distribution and the cogs of economy turn. We will see what the government borrowing data looks like this morning and the market forecast is for a significant reduction in borrowing levels. That will help Theresa May and Phillip Hammond with their plans. Sterling may well have a positive end to the week.
Yesterday’s surprise data was a very poor inflation figure -0.6% on the month was well below most forecasts and the fact that core inflation was down 0.7% was a real worry for the Eurozone powers-that-be. Shunting billions into the banking sector simply doesn’t stimulate consumer activity. I refer you to my previous comments. The EU data diary is like the promise of a wall across the US-Mexican border; empty. The Euro will follow in the wake of the central bankers and politicians.
The afternoon belongs to Canada. Retail sales and inflation data are all due for publication at 13.30 GMT. We are expecting inflation to show flat prices (no inflation at all) but the retail data should reflect improved activity in shops but slower car sales. The Canadian Dollar has been holding up well in the face of poor recent data. Whether this is enough to give it a boost is the unknowable at this stage.
It’s a short report today because there isn’t much to talk about other than the fact that I read an article which says the world will end today when the poles flip from north to south and that will trigger cataclysmic events across the globe resulting in our total annihilation. At first I thought it was an article published by the ‘EU Remain’ campaigners but no, the author was talking about the global magnetic fields. So I was worried, as you would be, and then I saw the date on the story; 29th July 2016. So we survived. Phew. That was close then. Have a good weekend and live every day as if it is your last.  

Nice car

A guy is out driving in his Ferrari convertible. He pulls up at some traffic lights and an old chap on a dilapidated looking moped pulls up alongside him. 
“Wow,” Says the old dude. “That’s a pretty car. What is it?”
The young guy blips the throttle a couple of times before saying, “It’s a Ferrari, Just got it.”
The old guy leans over and looks into the front of the car at all the switches and dials. “Well it looks pretty fast. That speedo goes up to 220 mph. Wow. You take it careful young man.” He says. 
The Ferrari driver, feeling like he is being patronised, floors the throttle at that moment as the lights are just turning amber. He is in 2nd gear and doing 80 mph when something flashes past him on his left. He is astonished to see it is the old guy on his moped and he is waving his hand at the Ferrari driver. ‘Cheeky old so-and-so. I’ll show him. He thinks to himself as he shifts to third and passes the moped with ease.
A few seconds later, the moped flashes past him again. He glances down at the speedo and he is doing 120 mph. The old guy on the moped is still waving and gesticulating at the driver. The driver can’t believe what he is seeing, so he catches up with the moped which is slowing fast at this stage. The Ferrari driver stops and gets out to flag the moped rider down. The old guy approaches him at considerable speed and ploughs into the back of the car, destroying the rear end and sending the old chap flying into the grass verge.
The driver runs to him but finds the old chap crumpled in a heap. He is breathing hard and holding his chest. Oh my god, you were going so fast. Is there anything I can do for you?” he says, holding the head of the exhausted and bruised old timer.
“Yup,” says the old man between gasped breaths. “unhook my braces (gasp gasp) from your mirror.”

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Public sector net borrowing 7.3b -2.3b
CAD 13:30 Canada: Core CPI m/m 0.0% 0.0%
CAD 13:30 Canada: Core retail sales m/m 0.9% 0.3%
CAD 13:30 Canada: CPI m/m 0.2% 0.0%
CAD 13:30 Canada: Retail sales m/m 0.2% 0.5%

FX Research by David Johnson

Daily Currency Analysis with William Busby

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