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July 2016

Sterling slips on poor retail sales

Published: Friday 22 July 2016

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  • Sterling slips on poor retail sales
  • ECB on hold and no urgency for rate cuts
  • Canadian inflation and retail sales due later

I am investing in brick companies. If that wall between Mexico and USA is getting built, I want to make a few quid before Donald Trump really ramps things up.  Or, of course, we could see the wife on another president come to power in America. And at the same time, the current First Lady is doing carpool karaoke with James Cordon and Boris Johnson is the face of Britain for foreign governments.  The world has gone a bit crazy-8-bonkers hasn't it.
 
The European Central Bank left their base rate on hold at 0% and didn't adjust bond purchases when they met yesterday; their first meeting since the UK vote to leave the EU. They saw no need for immediate policy changes but left the door open for further stimulus as needed. It's hard to know what they could do really; negative interest rates have limited effect and there is little evidence that huge volumes of bond buying do anything other than shore up stock markets. Nonetheless, the Euro strengthened a little on the news and EU stock markets were steady. This morning's French purchasing managers indices will give direction to the Euro. I think the forecasters are too optimistic, so be prepared for weakness in the Euro if any of these indices fall near to the crucial 50 level.
 
UK data showed that UK high streets were bedevilled by poor weather and pre-referendum fears in June. Sales were up by 4.3% on the year but down by 0.9% compared to May.  Whether that will reverse with July's hotter weather and in spite of the Brexit nervousness is anyone's guess but it will be interesting. Sterling slipped a little on that news and is likely to slip further when today's purchasing managers indices are published. It was inevitable that a vote to leave the EU would result in a drop in confidence but, as long as the service sector one is better than 49.0, the Pound may even strengthen today. On these indexes 50 is the borderline between positive and negative sentiment, so we have to assume they will all be below 50. Sterling seems glued to $1.32 and €1.19, so we are looking for any break away from these levels.
 
This afternoon brings Canadian retail sales and inflation data. The forecasters are not expecting any growth in retail activity but are looking for a small rise in consumer price inflation in line with recovering oil and energy costs. The Canadian Dollar may well strengthen by a cent or so if that is proven to be true.
 
And in 1844, William Archibald Spooner was born. The man who gave rise to the term, spoonerisms, the switching of syllables or the beginnings of words either intentionally or by accident but often comically. As an Oxford Don, he told one lackadaisical student that he had "tasted two worms" by "Hissing all his Mystery lectures" and, at a wedding he pronounced that it was "kisstomary to cuss the bride". We have a standard description of a certain brand of chocolate in our house. We apparently like Mairy Dilk (my wife spoonerises all the time), and my daughter coined the term 'Hipotominous' for the big aquatic beasts which is now the only name we have for hippopotamuses amongst my family. It's funny how these things stick.
 
Have a wuper seekend.
 
One and Two liners

  1. My girlfriend said I was immature. I said "That's not the secret password so get out of my fort."
  2. Someone stole my Microsoft office and they are going to pay. You have my Word.
  3. What did the 80 year old Pirate say? Aye Matey.
  4. How do you think the unthinkable? With an itheberg.
  5. I used to fear hurdles but, somehow I got over it.
  6. Police were called to a house in York today after a misunderstanding. Apparently a two-year-old was resisting a rest. 

FX Research by David Johnson

Daily Currency Analysis with Charlie Horsley

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