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March 2016

Sterling wobbles on mixed data

Published: Thursday 24 March 2016

  • Sterling wobbles on mixed data
  • US Dollar boosted by commodity slides
The lack of major data during yesterday's trading sessions meant the markets had a feet up and relaxed day. Exchange rates meandered in minor ranges and pubs near trading floors probably did a roaring trade. Even the UK weather was quite spring-like for a change.
Things will be a tad more frantic today with UK retail sales and the British Bankers Association lending data to whet appetites before this afternoon's US durable goods data. We have already had the European Central Bank's economic bulletin.
So, Sterling strengthened a little on the announcement of a smaller decline in UK retail sales than the markets had expected. The monthly decline of 0.4% was better than (or not as bad as) the 1.0% the markets were expecting.  Sterling bounced a little, recovering a small part of its recent losses but it will take more than that to reverse the negative sentiment surrounding Britain's potential exit from the EU. That bounce was short lived though because the BB reported a surprise drop in lending levels.
The ECB bulletin suggests that Europe's recovery has been weighed down by external developments. Welcome to the real world ECB; everyone is in the same boat but the lack of activity in Europe has a lot of local issues as well. All the more reason perhaps for the EU members wanting the UK which through a combination of trade and contribution adds £105 billion a year into EU GDP, to stay within the EU club.
This afternoon's US data isn't likely to be a major market mover but recent calls from Fed members for further interest rate hikes are strengthening the USD. The continued slide in commodity and energy prices is also benefitting the strength of the USD and may well continue to do so. The USD's strength could quickly unravel though if Fed Chairwoman, Janet Yellen quashed the idea of early rate hikes, I suspect she may well do that in the coming days.
Away from the markets, everyone else is gearing up for the monster choc-fest that we call Easter. If calories were Pound coins, we would all be much wealthier by Monday.  Have a lovely Easter break everyone.

Parental advice

Father: What are you doing playing computer games? You need to get your homework done.
Son: What for?
Father: Because then you'll get good marks...
Son: And...?
Father: Then you can get a good job.
Son: So...?
Father: Then you can buy a nice house and a cool car.
Son: And...?
Father: And then you will be able to relax when you're older.
Son: What does it look like I'm doing now?
Market BST Data/Event Previous Expected
GBP 09:30 UK: Retail sales, % m/m (y/y) 2.3 -1.1
GBP 09:30 UK: BBA lending data 47509 47900
USD 12:30 US: Initial jobless claims, k (4wma) 265 265
USD 12:30 US: Core capital goods orders, % m/m 3.4 -0.6

FX Research by David Johnson

Daily Currency Analysis with Michael Condron

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