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Sterling rises after retail sales display serious traction in April

GBP

Sterling kicked higher on Thursday after the release of Retail Sales showed a higher-than-forecast gain in April, boosting hopes about that the strength of the economic recovery, and increasing speculation policy-makers might bring forward the date when they would raise interest rates.

Retail Sales rose 1.2% in April – easily beating expectations of 0.2% and substantially higher than the 0.0% in March. Year-on-year, they rose by 4.7%, which was higher than the 3.7% forecast but still a basis point below the 4.8% of year ago.

Retail Sales including autos and fuel increased by 1.2% mom from -0.7% previously when a 0.4% increase had been expected.

Other data showed CBI Total Orders falling by a deeper than expected -5.

USD

The dollar pulled-back on Thursday, ending its multi-day rally, after a mixture of lacklustre data and strength in its counterparts saw it weaken in most pairs.

Whilst Initial Jobless Claims rose by a higher-than-expected 10k to 274k it was only 4k more than analyst’s had expected, and yet it was enough to put pressure on the greenback. The bigger picture, however, remained strong for Jobless Claims after the 4-week moving average of Initial Claims recorded a 15-year low. This could mean dollar losses will be temporary.

Continuing Claims actually fell by 12k when it had been expected to rise by 8k to 2231k. Yet other data was not so good: with the Chicago Fed National Activity Index, actually undershooting expectations and showing a -0.15 contraction compared to the 0.0% flat figure forecast.

Manufacturing PMI also missed estimates, falling to 53.8 from 54.1 when investors had been expecting a gain to 54.5.

Existing Home Sales fell by -3.3% in April compared to the 6.5% rise in March and lower than the 0.8% forecast.

The Philadelphia Fed optimism gauge meanwhile also undershot, coming out at 6.7 against the 8 investors had booked and below the 7.5 of the previous month.

EUR

The euro traded mixed on Thursday as the release of slightly disappointing data failed to lift the currency, although greater dollar weakness led a rise in EUR/USD.

The main event on the euro’s event risk calendar was the release of Purchasing Manager Index data, which showed Manufacturing in the euro-zone rising to 52.3 from 52.0, yet Services falling to 53.3 from 54.1. It is thought that the rise in Manufacturing was partly as a result of the weaker euro boosting exports.

Chief Economist at Markit Chris Williamson, said: “The euro-zone recovery lost some of its vigour in May, with growth slowing slightly for a second successive month. At the moment the extent of the slowing is not a major concern, but will no-doubt be causing some nail-biting at the ECB as policy-makers await signs that quantitative easing is the panacea the region needs the achieve a robust sustainable recovery.”

Both Services and Manufacturing PMI slowed in Germany but only Services slowed in France, whilst Manufacturing recovered, although remaining in contraction territory.

Williamson again: “The survey results suggest the German economy is course for a reasonable expansion of 0.4% in Q2, but France is likely to struggle to see growth of 0.3%. However, it is outside these two core countries where the real action is likely to be, with the rest of the region enjoying its best quarter of economic growth and job creation for almost eight years.”

JPY

The yen strengthened 18 points Thursday and was trading at 121.00 to the dollar during the New York session amidst better-than-expected Japanese GDP data.

Japan’s Manufacturing PMI rebounded in May. Early morning data indicated that Japan’s Markit Flash PMI rose to a seasonably adjusted level of 50.9 in May from a final reading of 49.9 in April, therefore entering into expansion territory, as output and orders picked up in the nation.

Japanese shares hit a new 15-year high on Thursday on hopes that the hitherto moribund economy was finally coming to life.

Meanwhile the BOJ’s interest rate decision and Governor Harohiko Kuroda’s speech is scheduled for tomorrow. Some analysts believe the central bank may upgrade their economic forecast given the appearance of a rebound of the nation’s manufacturing PMI, however the Board is likely to be wary as the consumer spending recovery lacks breadth.

GBP

Sterling kicked higher on Thursday after the release of Retail Sales showed a higher-than-forecast gain in April, boosting hopes about that the strength of the economic recovery, and increasing speculation policy-makers might bring forward the date when they would raise interest rates.

Retail Sales rose 1.2% in April – easily beating expectations of 0.2% and substantially higher than the 0.0% in March. Year-on-year, they rose by 4.7%, which was higher than the 3.7% forecast but still a basis point below the 4.8% of year ago.

Retail Sales including autos and fuel increased by 1.2% mom from -0.7% previously when a 0.4% increase had been expected.

Other data showed CBI Total Orders falling by a deeper than expected -5.

USD

The dollar pulled-back on Thursday, ending its multi-day rally, after a mixture of lacklustre data and strength in its counterparts saw it weaken in most pairs.

Whilst Initial Jobless Claims rose by a higher-than-expected 10k to 274k it was only 4k more than analyst’s had expected, and yet it was enough to put pressure on the greenback. The bigger picture, however, remained strong for Jobless Claims after the 4-week moving average of Initial Claims recorded a 15-year low. This could mean dollar losses will be temporary.

Continuing Claims actually fell by 12k when it had been expected to rise by 8k to 2231k. Yet other data was not so good: with the Chicago Fed National Activity Index, actually undershooting expectations and showing a -0.15 contraction compared to the 0.0% flat figure forecast.

Manufacturing PMI also missed estimates, falling to 53.8 from 54.1 when investors had been expecting a gain to 54.5.

Existing Home Sales fell by -3.3% in April compared to the 6.5% rise in March and lower than the 0.8% forecast.

The Philadelphia Fed optimism gauge meanwhile also undershot, coming out at 6.7 against the 8 investors had booked and below the 7.5 of the previous month.

EUR

The euro traded mixed on Thursday as the release of slightly disappointing data failed to lift the currency, although greater dollar weakness led a rise in EUR/USD.

The main event on the euro’s event risk calendar was the release of Purchasing Manager Index data, which showed Manufacturing in the euro-zone rising to 52.3 from 52.0, yet Services falling to 53.3 from 54.1. It is thought that the rise in Manufacturing was partly as a result of the weaker euro boosting exports.

Chief Economist at Markit Chris Williamson, said: “The euro-zone recovery lost some of its vigour in May, with growth slowing slightly for a second successive month. At the moment the extent of the slowing is not a major concern, but will no-doubt be causing some nail-biting at the ECB as policy-makers await signs that quantitative easing is the panacea the region needs the achieve a robust sustainable recovery.”

Both Services and Manufacturing PMI slowed in Germany but only Services slowed in France, whilst Manufacturing recovered, although remaining in contraction territory.

Williamson again: “The survey results suggest the German economy is course for a reasonable expansion of 0.4% in Q2, but France is likely to struggle to see growth of 0.3%. However, it is outside these two core countries where the real action is likely to be, with the rest of the region enjoying its best quarter of economic growth and job creation for almost eight years.”

JPY

The yen strengthened 18 points Thursday and was trading at 121.00 to the dollar during the New York session amidst better-than-expected Japanese GDP data.

Japan’s Manufacturing PMI rebounded in May. Early morning data indicated that Japan’s Markit Flash PMI rose to a seasonably adjusted level of 50.9 in May from a final reading of 49.9 in April, therefore entering into expansion territory, as output and orders picked up in the nation.

Japanese shares hit a new 15-year high on Thursday on hopes that the hitherto moribund economy was finally coming to life.

Meanwhile the BOJ’s interest rate decision and Governor Harohiko Kuroda’s speech is scheduled for tomorrow. Some analysts believe the central bank may upgrade their economic forecast given the appearance of a rebound of the nation’s manufacturing PMI, however the Board is likely to be wary as the consumer spending recovery lacks breadth.



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