Today was a good day for any clients currently holding on to USD to buy foreign currency. Analysts’ eyes were firmly focused on today’s US retail sales figures. June consumer spending figures dropped by 0.2%, however today’s figures helped to put minds at rest that the US economy wasn’t slowing down. In fact, retail sales showed a healthy increase of 0.6% from the previous month. This is welcome news as investors try to figure out the FED’s next move.
A strong retail sales figure today has helped turn attention away from the weak inflation data that dampened the idea of an interest rate hike anytime soon, and helped to give USD a welcomed boost. I personally think the US will start to look at raising interest rates around December time if the positive data surrounding retail sales continues to show economic growth.
How is the UK economy effecting cable rates?
This came after the pound took a hit in early morning trading following a stagnant inflation reading. A weaker pound following Brexit has meant that inflation has been steadily rising ever since, however there have been recent reports that this fallout from Brexit has been fully passed on to the consumer, and that inflation will now start to stagnate. This is damaging for the pound because it means that an interest rate cut for the UK is off the cards for the foreseeable.
Not only is economic data disappointing for the UK, but the Brexit negotiations are a complete wildcard, in that no one knows what is around the corner which is causing doubts in investors’ mind and ultimately proving Sterling negative.
All in all, today has seen the Pound fall by 0.76% against the US Dollar, which highlights the current volatility in the Market. Tomorrow, average earnings and unemployment data is released for the UK and if this signals a further strain on households living standards, I would be surprised for GBP/USD to test the 1.27 barrier.