25 May 2018
Market Brief: will it be a calm end to the week?
Retail sales in the UK rose by more than expected in April with an increase of 1.6% on the month whilst ex-fuel sales rose by 1.3% month to month.
|Today's data releases
|09.30||UK Q1 GDP||Support||Resistance|
|13.30||US durable goods orders||GBP/USD||1.3300||1.3450|
|15.00||US University of Michigan consumer sentiment||GBR/EUR||1.1300||1.600|
Retail sales in the UK rose by more than expected in April with an increase of 1.6% on the month whilst ex-fuel sales rose by 1.3% month to month. Consensus had been for +0.9% on the headline and +0.5% on the core, so this was a decent beat. Note that after the weather affected March reading, the bounce back in yesterday’s figures provides some confidence that consumer spending maintains a degree of momentum. This should increase further as the year goes on amidst falling inflation and slowly rising pay growth. Sterling climbed back above $1.34 against the USD after the data but has retraced since.
On geopolitical matters, President Donald Trump cancelled the June 12th meeting with North Korean leader Kim Jong Un due to the “tremendous anger and open hostility” in recent statements from Pyongyang. However, Trump held out an olive branch to Kim by noting that "someday, I very much look forward to meeting you" to negotiate denuclearising the Korean peninsula. US Equities didn’t take the news so well, they fell as much as 1% within an hour of the announcement but recovered later in the day with the S&P closing 0.2% lower. As expected in this somewhat risk off environment, government bonds outperformed. The yield of 10 year Treasuries dipped 2 basis points to 2.97% (bond prices are inversely related to yield).
In a speech last night BoE Governor Mark Carney warned that the MPC was ready to take action in the event of a ‘disorderly’ Brexit, stating that the BoE has the appropriate tools to support demand if necessary. On the other side, he stated that the intended pace of rate increases would be greater than May’s conditioning path if business investment picked up more strongly than expected. Sterling showed little reaction to his comments.
The day ahead
Looking at the day ahead, we have the second release of Q1 GDP in the UK. In the US this afternoon, we have the US flash April durable goods and the (final) May Michigan consumer sentiment survey. Away from that, EU finance ministers are due to discuss the latest on Brexit negotiations, while Russian President Putin, France’s President Macron, Japan's Abe and the IMF's Lagarde take part in a panel. Elsewhere, the ECB’s Villeroy and Coeure will speak while the Fed’s Powell and BOE’s Carney will attend a conference in Stockholm.
Thought of the day
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