Daily Insight

The Dollar received an unexpected boost yesterday and managed to make some unlikely gains, firming 0.5% against the Euro and 0.3% versus the Pound following a surprisingly positive report on U.S retail sales. In stark contrast to retail activity in the UK, sales jumped 1.0% in the figures for November, which was much more than anticipated and it seems growth in sales may be able to support economic growth following the dramatic slump in housing and manufacturing this year. In light of the report, the Dollar rallied against the majors and it seems that a buoyant labour market combined with a significant rise in personal income will help boost consumer spending going into the New Year. There is some significant economic data released this afternoon with the focus falling on the weekly jobless report, which is expected to show that the number of first time claims filed in the week ending December 9th probably fell to 320,000 from 324,000 the previous week.

The Euro came under pressure yesterday falling against the Dollar and declining by a further 0.2% versus the Pound following a fundamental lack of economic data released in the Euro-zone and that trend may continue this morning with the ECB monthly bulletin taking centre stage. It is widely anticipated that the statement will mirror the tone and language of the press conference last week where policy makers elected to raise interest rates for the sixth time this year. The chairman of the ECB, Jean-Claude Trichet, seemed to suggest that a further tightening of monetary policy would be likely in the New Year as economic growth continues to expand at the fastest pace in six years while price pressures still remain a concern for policy makers.

Initially, the Pound rallied against the majors yesterday following a government report on the labour market, which showed that UK unemployment unexpectedly fell by the most in nearly two years in November while growth in personal income also accelerated, adding to the case for a further rise in UK interest rates. The number of people out of work and claiming benefits fell to an annual reading of 950,800 while the jobless rate remained unchanged for a ninth month in succession at 3.0%. With growth in the labour market seemingly gathering momentum and a significant rise in average hourly earnings will only add to speculation that the Bank of England intend to increase borrowing costs by a further 25 basis points in February as inflation continues to accelerate at the fastest pace in nine-years. In terms of economic data, the Pound may receive a further boost this morning as UK retail sales are expected to show a modest gain in November, rising 0.1% from the previous month after the lack of retail activity expressed by the British Retail Consortium last week.

Data Released 14th December

UK 09:30 Retail Sales (November)

EU 09:00 ECB Monthly Bulletin

U.S 13:30 Import / Export Prices (November)
U.S 13:30 Initial Jobless Claims (w/e 9th December)

written by Adam Solomon