Calm before the storm?

22 May, 2013

Matthew Boyle

Yesterday was relatively quiet in the way of major data releases, and as such no large movements or swings were seen within the markets as many anticipated today – a much busier day for market information.

This morning we have seen a raft of UK retail data all come in well under anticipation and as such the pound lost almost a cent against both the dollar and Euro within only an hour, whilst also losing ground against most of its other major counterparts. With all coming in well under predictions this sudden drop in rates may be little surprise – Retail sales (YoY) 0.5% from 2.0% and (MoM) -1.3% from 0% while Retail sales ex fuel came in (YoY) -1.4% from 0.1% and (MoM) 0.2% from 0.7%. These results are considerably bearish for the UK and seem a long way from the positive outlook of Mervyn King last week.

The BoE also met this morning and voted unanimously in favour of the proposition that the Bank Rate should be maintained at 0.5%. Perhaps more importantly they would maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion – otherwise known as Q.E with the vote remaining at 6 to 3 which has been the case for some months. However, whether or not this remains the case if figures like these continue to be posted and with the arrival of new BoE chief Mark Carney in July is yet to be seen.
Tomorrow we have both Fed Committee minutes and also ECB president Mario Draghis speech – both of which could perhaps further unsettling the pound, as the USD has in recent weeks been overly bullish, whilst Draghi may look to continue to promote the strength of the Euro despite many ongoing underlying issues.
Elsewhere, and while the pound may have taken a hit, we have seen Japan hit hard again as it posted its tenth trade deficit in a row, taking it now to 879.9bn yen ($8.6bn; £5.7bn) and wider than many analysts had forecast and only adding to their ongoing economic woes.

If you have any upcoming currency transfers to make, particularly those involving the pound, speak to your Currency Index broker as soon as possible. We can help you stay well informed and well ahead of the markets.