Dollar rebounds against its major peers
27/Mar/2015 • Currency Updates•
After a strong start to the day, Sterling faded as the day progressed yesterday to end the London session 0.7% lower on the Dollar.
Retail sales data in February pointed to a solid performance in Q1 growth, coming in above expectations at an annualised 5.7%. Falling shop prices, of which declined at their fastest rate since 1997 at 3.6% last month, encouraged a 0.7% increase in spending in February. Retail sales, excluding fuel, also surprised on the upside at 5.1% YoY. Given wages are now firmly above inflation for the first time since the financial crisis, consumers and retail stores are both benefiting from an increase in disposable income. Encouragingly, the distributive trade survey published by the Confederation of British Industry showed that retailers expected sales to continue rising. The survey surprised expectations, registering a reading of +18, compared to +1 recorded last month.
No major data out this morning, however, Governor of the Bank of England Mark Carney will be speaking at a Bundesbank conference in Frankfurt at 8:45am.
A strong day’s trading for the Dollar saw the Euro decline by 1.3% against the Greenback.
Germans are at their most confident in over thirteen years according to GfK’s monthly survey. Buoyed by low energy prices and the launch of QE, the consumer sentiment index increased from 9.7 last month to 10.0. Money supply in the Eurozone grew less than expected in February according to the European Central Bank. M3 money supply rose by an annualised 4% last month, below the 4.3% that was forecast. However, in the three month to February the money supply managed to climb by 3.8%, its greatest increase since the financial crisis.
Over in Greece, the New Democracy leader Kyriakos Mitsotakis warned the country could go bankrupt by Easter, while the Government declared it was confident a deal on its economic reforms could be reached by early next week.
Only second-tier data releases in the Eurozone today including Italian retail sales and industrial output. Euro volatility is therefore likely to be determined by external announcements.
Encouraging labour and growth figures released on Thursday caused the US Dollar to appreciate against its major counterparts by 1.1%.
More strong labour data out in the US yesterday after initial claims for jobless benefits fell by 9,000 to just 282,000 in the seven days to 21st March. More importantly, the four-week moving average of claims dipped below the threshold 300,000 to 297,000. The high correlation between low jobless applications and increased hiring suggests there will be another strong month of nonfarm payroll data released next Friday. Even more impressively, growth in the services sector expanded in March at its fastest pace in six months according to Markit. The flash PMI rose to 58.6 this month, up from 57.1 in February. The composite PMI, of which includes both services and manufacturing sector growth, climbed to 58.5 from 57.2 to mark its highest reading since September. Speaking at a conference in Detroit, Atlanta Federal Reserve president Dennis Lockhart claimed the US economy was in a solid shape to weather the impending monetary policy tightening.
Revised growth data for the US in Q4 is expected to show a moderate upward revision when announced at 12:30pm today. This will be followed by a speech from Fed Chair Janet Yellen at 7:45pm in San Francisco.
Rest of the world
South Africa’s central bank kept its interest rate unchanged at 5.75%, although warned inflationary pressure was growing due to rebounding oil prices. Prices of Brent crude rose by almost 6% on Thursday after Saudi Arabia, the world’s biggest crude exporter, launched airstrikes on rebel targets in Yemen.