- Chinese data disappoints
- Minutes from RBA and FOMC to dominate the week
- UK data overshadowed by Referendum
US retail sales data impressed on Friday, posting the strongest increase in a year. Consumer spending rose by 1.3% in April beating expectations of a 0.8% increase. The Dollar gained on the news with GBPUSD coming off the recent highs currently sitting at 1.4360 which is a key level of support; below here opens up a move down towards 1.4100.
The markets currently are generally muted however, perhaps the calm before the storm. Aussie Dollar looks to be pairing back some of the gains it lost last week in spite of slightly disappointing Chinese news over the weekend. Industrial production rose 6.0% year on year for April versus expectation of 6.5%. Chinese retail sales also missed their mark coming in at 10.1% year on year versus 10.3% expected.
A busy week ahead as the US Federal Reserve’s Federal Open Market Committee (FOMC) minutes of their most recent interest rate meeting will be the highlight as we look towards potential news on an interest rate hike. The FED left the door open at the previous meeting for an interest rate hike in June after they omitted the previous language that “global economic and financial developments continue to pose risks,” instead saying officials will “closely monitor” the world situation. Any suggestion in the minutes that an interest rate increase is around the corner will see the US Dollar strengthen.
The Brexit campaign became more intense and more emotive this weekend. Boris Johnson speaking to the Telegraph compared the EU’s idea of an EU global super-state to Hitler and Napoleon’s unification ideas. As we head towards the final weeks of the referendum, no doubt Tory infighting will continue and as the polls are getting tighter – that will weigh on the pound and as we saw with the Scottish referendum the market will be jittery in the run up to the 23rd
The Australian Dollar has weakened significantly with GBPAUD rallying from 1.83 to 1.97 in only a few weeks – the minutes released from the RBA’s last meeting should guide us on any potential future rate cuts. If they go the other way and suggest that it is likely to be the last cut then the Aussie Dollar should rebound.
There is a great deal of data from the UK out this week including Consumer Price Inflation, employment data and retail sales numbers. Nonetheless, Sterling's reaction to them is likely to be subdued as focus stays on the EU referendum in June.
Today's Major Economic Releases
||US: Empire state manufacturing index
||US: NAHB housing market index
||Canada: BoC review
||US: TIC long-term purchases
Daily Currency Insight by Alastair Sweetman
Daily Currency Analysis with Charlie Horsley
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