25 May 2018

Market Brief: will it be a calm end to the week?

Sana Hanassi-Savari

Dealing team

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
  Key levels
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

Market overview

Happy Friday!

 

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

With a long bank holiday weekend on our doorstep and hearing one of my single colleagues (Ian Wilson - 020 7597 5143) is off to Stockholm for it, I feel compelled to share with you some of my latest reading on the art of a successful date. While you might currently believe the answer to a successful relationship hinges mostly on "chemistry" or mutual interests, a team of psychology researchers from McGill University in Montreal suggests that there's an unlikely judge ultimately making the call: your behavioural immune system. Unlike your physiological immune system - that collection of cells, organs and lymph nodes that defends your body from invading pathogens - your behavioural immune system relies on subconscious sensory impulses to steer you away from potential germ-ridden danger. Although a relatively new theory, the notion that humans and animals noticeably change their behaviour to avoid communicable diseases has been demonstrated in hundreds of studies and is regularly shown in everyday life; it may be the reason you feel compelled to switch bus seats when the person sitting next to you is constantly sneezing for instance. In short, the study concludes that when your behavioural immune system is activated it seems to put the brakes on our drive to connect with our peers socially – ultimately ruining your hot date. To learn more about your behavioural immune system how this might affect your FX hedging decisions, give our dealing room a call on 020 7597 4000 today.

Discover how our Treasury team can help your business

Live FX graph

Live FX graph

Live FX rates

Live FX rates

  • View important information

    This Market Commentary is provided for information purposes only and should not be construed as an offer, or a solicitation of an offer, to buy or sell any related financial instruments. This commentary has not been prepared in accordance with legal requirements designed to promote independent investment research. The information contained in this commentary has been compiled from sources believed to be reliable but no representation or warranty, implied or not, is provided in relation to its accuracy, suitability or completeness. Any opinions, forecasts or estimates constitute a judgement as at the date of this report and do not necessarily reflect the view of Investec Bank plc ("Investec"), its subsidiaries or affiliates. This commentary does not have regard to the specific investment objectives, financial circumstances or particular needs of any recipient and it should not be regarded as a substitute for the exercise of investors' own judgement. Investors should seek their own financial, tax, legal and regulatory advice regarding the appropriateness or otherwise of investing in any investment strategies and should understand that past performance is not a guide to future performance and the value of any investments may fall as well as rise.This commentary is confidential and may not be disclosed or distributed to any third party without the prior written consent of Investec. Investec Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and a member of the London Stock Exchange. Registered office 2 Gresham Street, London, EC2V 7QP. Investec Bank plc 2018.