In what originally seemed like it would be a relatively quiet week, with the US posting a few key bits of data but the UK and Eurozone following a quite schedule. It seemed a strong USD was inevitable, especially with hints that rate cuts could be faster in the UK than anticipated. That, however, did not turn out to be the case with the Pound having a particularly successful week. Moreover, the USD has taken a considerable beating from the Euro as well. A surprising yet welcome outcome for Importers across the UK, I’m sure.
The only major piece of data released in the UK this week was the Claimant Count Change on Tuesday. As the first piece of employment data posted throughout the month, it provided an indication of the state of the employment market. The figures were surprisingly strong, coming in at 8.9K compared to the forecast of 13.9K. This could be seen as the catalyst for the strong GBP observed throughout the week. However, strong PPI results from the US later that day seemed to curtail the momentum the Pound was beginning to gain.
Wednesday was the real highlight of the week, with the US releasing its latest Retail Sales, CPI, and Empire State Manufacturing figures. Although Core Retail Sales figures aligned with forecasts at 0.2%, the overall Retail Sales figures disappointed, showing no growth compared to an expected 0.4% increase month-on-month. Similarly, CPI figures showed a slight downturn, with monthly CPI forecasted at 0.4% but released at 0.3%. However, this did not affect the annual inflation figure of 3.4%, which remained unchanged. These results significantly altered the week’s dynamics, with both the Pound and the Euro making considerable gains, each experiencing around a 100-pip swing against the USD. With little other data for the rest of the week, aside from in line unemployment claims from the US, it is no surprise that the Dollar struggled to recover lost ground.
Looking ahead, key data points from the UK, US, and Eurozone will resume normal practice. Thursday will likely be the most notable day, with the latest PMI manufacturing and services data released for all three regions. If recent PMI releases are any indication, gains or losses may cancel out as all three are released on the same day. With this in mind, UK CPI data out on Wednesday and UK Retail Sales data out on Friday could be the flashpoints for any significant Sterling push.
