Daily Insight

We witnessed a fairly quiet day in terms of data released yesterday and the market remained relatively stagnant but there was some positive news for the Pound as the BRC Retail Sales survey showed year-on-year growth of 3.6% and first quarter sales were up 2.7% against the same period last year, which was slightly ahead of market expectations. The Bank of England have been waiting for a pick-up in consumer sentiment before shifting monetary policy but the figures released yesterday were encouraged by the recent rise in sales of large high-definition televisions in preparation for the World Cup and therefore UK consumer confidence remains fragile. Further emphasis of this sentiment is expressed in the Nationwide survey on UK confidence this morning with the index sticking close to the six-month low in April, rising to 94 in the figures released for May as consumers struggle with rising debts and higher utility bills.

Without any significant data released in Europe or the States yesterday, we can look forward to euro-zone retail sales this morning and forecasters are anticipating a dramatic revival in European consumer sentiment with sales expected to rise from 0.2% in March to 2.4% in April led by the continuing improvement in the labour market. The Euro has been gaining this week on speculation that the ECB will need to lift interest rates by as much as half a point on Thursday but if policy makers choose to elect a more measured approach then the Euro may decline against Sterling and the U.S Dollar. However, there are concerns from a selection of European finance ministers who are conscious of the fact that the dramatic appreciation of the Euro could have a negative impact on the economy. The single currency has gained by more than 8% versus the Dollar this year alone and nearly 4% since mid April, which has left policy makers anxious that European exports will become less attractive to foreign investors and therefore widen the trade deficit.

The Dollar has continued its recent rally in the past 24hrs, dropping under 1.8600 last night against Sterling and recording a three day winning streak against the Euro as speculation intensified that the Federal Reserve will lift borrowing costs for a 17th month in succession in June. Following Ben Bernanke's testimony in Washington on Monday, investors hurried back to buy the Dollar as he talked aggressively about the Fed's aim to contain rising inflation. Fed Bank of Atlanta president Jack Guynn will speak on the U.S economic outlook and housing markets today and former Fed chairman Alan Greenspan will testify to the Senate on oil dependence and economic risk. Elsewhere in the States, there is some significant data released with Consumer Credit expected to rise to $3.5 Billion in April, which is up from $2.5 Billion in March.

Data Released 7th June

EU 10:00 Retail Sales (April)

U.S 14:00 Greenspan to Testify to Senate on Oil Dependence and Economic Risk
U.S 20:00 Consumer Credit (April)

written by Adam Solomon