• Strong Retail and unemployment data shock markets
• Consumer price data showed moderate gains in inflation
• Moody’s downplay Brexit impact
• FOMC meeting offers little confidence for US economy

Post-Brexit data surprises markets

Following the Consumer price release on Tuesday which showed moderate gains in inflation, markets have been waiting with anticipate for the important retail sales this morning. Whilst Brexit remains a key concern for global markets, retail sales for the UK came in far stronger than anticipated, with stronger growth MOM and YOY.

Whilst it may be too early to draw conclusions about the impact of Brexit, markets reacted providing Sterling with further support against the US Dollar, pushing rates back to the mid 1.31’s.

Economic releases for the UK will be relatively quiet for the remainder of August, with much of the movements now focused around mortgage approvals and Q2 GDP estimates.

Economic releases may be too early to interpret

The news surrounding today’s retail figures are encouraging at best, markets remain concerned about Brexit and its implications on the British economy. It may take time for the impact of Brexit to impact the UK with small movements likely off the back of further positive data. However a continuous stream of positive data running through into the new year could ease market anxiety.

Moody’s have posted their latest GDP estimates and have downplayed the Brexit impact for next year, raising further optimism amongst investors. If the UK’s outlook remains positive we could see exchange rates move closer to pre-Brexit levels before Article 50.

FOMC meeting provides mixed signals

The FOMC meeting offered little hopes of a FED hike in the near future, whilst some have interpreted this as a possibility the message remains mixed. Global factors i.e. Brexit, economic data and concerns over the future pace of hiring were on the agenda.

It’s difficult to see when or if the FED will hike rates this year. Yellen has been reluctant to hike rates even in the best of times and it’s difficult to draw positive conclusions given the current climate.

If you are looking to buy US Dollars in the short term, the news this morning should provide you with a slightly better rate, but given the lack of economic releases in the coming weeks, Sterling could remain vulnerable to external influences.