US retail sales fall for third consecutive month in February
13/Mar/2015 • Currency Updates•
Sterling plunged against the Greenback for the second straight day on Thursday, depreciating by 0.85% despite a narrowing in the trade deficit to its lowest in over fourteen years.
Figures from the Office for National Statistics released yesterday morning showed the UK balance of trade fell in January from its five year high recorded a month previous. A lower cost in imports of oil caused a large decrease in overall imports by £2.5 billion from December. This, coupled with an increase in service exports to a record high, caused the total deficit to shrink to just £616 million, less than a third of its December size. A strong recovery in the US economy and a slight upturn in fortunes in the Eurozone have helped reduce the deficit to its smallest size since October 2000. Earlier it was revealed that British house prices rose more than expected last month. The Royal Institution of Chartered Surveyors (RICS) housing price balance climbed to +14 in February from +7, well above all forecasts.
The main event of the day, however, came from a dovish speech from Bank of England Governor Mark Carney who admitted Pound strength could drive inflation lower and cause a delay in the next interest rate hike. No significant data releases out in the UK today should lead to a quite days trading for the Pound.
The single currency rallied against the Dollar on Thursday, although still fell during London trading, ending 0.2% lower on the Greenback.
Inflation in Germany rebounded back into positive territory last month after price growth had fallen into deflation in January for the first time since the financial crisis. Official data from Destatis showed that the headline inflation rate rose by 0.9% MoM to an annualised 0.1%, bang on forecast. However, news out of Spain and France was not as encouraging, with both countries remaining in deflation at -1.1% and -0.3% respectively. Eurozone industrial production was down in January for the first time in five months, an indication that the weakening Euro is yet to provide a significant boost to exporters. The data from Eurostat surprised on the downside at -0.1%, although the annualised measure remained strong at 1.2%, its highest level since last summer.
In the rest of Europe, the ECB extended Greece’s emergency liquidity lifeline, and Bundesbank Chief Jens Weidmann rejected Greece’s criticism of the ECB. More inflation data out in the Eurozone today will see the release of the Italian CPI figures for February at 9am GMT.
An unexpectedly fall in retail sales failed to halt the Dollar, which finished 0.3% higher against its peers during the London session.
Harsh snowy and cold weather conditions caused sales in retail stores to decline for an unprecedented third straight month in February. The surprisingly large weather impact caused sales to fall by 0.6% last month as receipts fell in almost all categories. This marked the first time since 2012 that retail sales had declined for three consecutive months. Sales of clothing, building materials and at restaurants and bars all declined more than expected. Initial jobless claims dropped to a three week low of 289,000 last week. Economists had forecasts claims to fall to 305,000. However, despite this, the more representative four week moving average still remained above 300,000. Elsewhere, business inventories remained static in January, while the import price index fell by 9.4% YoY.
A number of second-tier releases to end the week in the world’s largest economy, including the producer price index at 12:30pm.
Rest of the world
Turkey’s President Erdogan backed off in his battle with the central bank having for week’s criticised policymakers for being too slow to ease monetary policy.