Positive Retail Data Fails To Cause Major Gains

31 October, 2012

There was positive data for sterling yesterday in the form of better than expected retail sales. Despite analysts predicting a +7 increase in retail in October, the figure was actually +30, well above the estimates. This has lent further credence to the idea that the UK economy is rapidly improving. Market analysts now say that for the pound to make any further major gains, the Bank Of England has to announce that no Quantitative Easing will take place this month. Having put it back in previous months, many have expected the bank to announce further QE next month. However, recent positive UK data releases may cause them to delay any further QE. As a result of this positive data, sterling managed to rally to a week long high against the US dollar.

Surprisingly, however, the value of sterling fell against the euro yesterday. Data revealed that Spain’s economy had contracted less than anticipated, as well as positive demand at an auction for Italian debt. Greece also reached a deal yesterday, about which Greek Prime Minister Antonis Samaras said: “If this deal is approved and the budget is voted, Greece will stay in the euro and exit the crisis.” If passed, Greece will impose 13.5bn euros worth of cuts, allowing them to receive another bailout. It remains to be seen what exactly these cuts will involve, and what the public reaction will be to them when they come into effect next week. There are concerns that, if the public and opposing political parties oppose the plans strongly enough, they may be scrapped entirely.

Proving that humanity sometimes doesn’t have control over the currency markets, the superstorm Sandy is causing major disruption to the US economy, with the cost of the damage so far estimated at $20bn. US stock markets also closed yesterday for the longest period since the September 11th attacks, a clear demonstration of the effect this catastrophe will have on the US economy. With the New York Stock Exchange planning to reopen today, it remains to be seen if the losses made yesterday can be salvaged. As it stands, the dollar has dropped significantly against both the value of the euro and sterling.

The markets are being incredibly unpredictable at the moment, with both nature and economists affecting their outcome. If you’re nervous about the effect changes in the market will have on any upcoming transfers, please don’t hesitate to call Currency Index to see how we can assist you.