US consumer spending soars; Greek negotiations stumble
26/Jun/2015 • Currency Updates•
Another relatively uneventful day in the UK economy was not enough to prevent the Pound appreciating by 0.2% versus Greenback and trading around a June high against the Euro.
There were signs of a slowdown in spending among UK consumers this month, news that will not be particularly welcome to the Bank of England. The monthly Confederation of British Industry survey showed that retail sales growth in Britain slowed, although remained above average for this time of year. The index fell from its five month high, of 51 in May, to just 29 this month, with increases in purchases of goods such as jewellery, offset by decreases in grocery sales. Despite decreasing, the figures still suggests healthy retail sales of approximately 0.9% in the second quarter of the year. This should also be boosted by wage growth, which is now soaring well above inflation levels, after earning growth increased to a three-and-a-half year high of 2.7% last month.
This afternoon, Bank of England Governor Mark Carney will be making a speech at the Inclusive Capitalism annual conference in London at 3.45pm, with traders, as always, looking to gain any insight into the central bank’s future plans regarding monetary policy.
The ongoing saga over in Greece stole the show in Europe once again yesterday, with many mixed reports from a number of parties culminating in a 0.1% increase in the Euro over the course of the day.
Yesterday proved to be yet another eventful day as far as Greece was concerned, despite still not reaching a deal. Early in the day, creditors had given the Greek Government an ultimatum to offer a credible reform package by mid-morning. This deadline was missed, with Alexis Tsipras’ government standing by their original proposals from Monday. The following three hour Eurogroup meeting in the afternoon failed to reach an agreement, with a further meeting instead called for Saturday morning. Angela Merkel claimed it was imperative a deal was struck before markets open on Monday, if not, the country risks imposing capital controls.
A few second tier releases in Germany and France this morning will be overshadowed by news out of Greece today, which again could dominate headlines.
Following three days of gains, the US Dollar had a mixed session yesterday, finishing trading 0.1% higher.
The main news out of the US yesterday came from the Commerce Department, which announced that household spending soared by the most in almost six years in May. Purchases increased by an unprecedented 0.9% last month, buoyed by a considerable strengthening in the labour market. The sharp increase was the largest since 2009, and gives another strong indication that the Federal Reserve is on course to hike interest rates in the US in September, in line with our expectations. In the same report, the level of personal income growth also increased, up marginally from 0.4% to 0.5%.
Elsewhere, the weekly number of jobless claims remained mostly unchanged, increasing marginally to 271,000, although the four week moving average declined to just 273,750. Markit’s services sector growth index also dipped moderately to 54.8 from 56.2. Disappointingly, this was the weakest reading since January.
Today will mark a relatively quiet end to the week in the US as far as data is concerned. Reuters will be releasing its consumer sentiment index for May at 3pm, followed by a speech by Federal Reserve member Esther George after markets close in the UK.
Rest of the world
The Swiss Franc fell after the Head of the Swiss National Bank, Thomas Jordan, reiterated yesterday that the Franc was “considerably over-valued”, signalling that the central bank would continue to intervene in the FX market when required.