GBP

Sterling has begun the day on the backfoot after UK retail sales for August disappointed. The Office for National Statistics reported earlier this morning that sales volume unexpectedly dropped 0.9% in the month of August, leading to the fourth consecutive monthly decline when previous months were revised lower. Economists expected a 0.5% rise. The report added that August’s drop appeared partly to reflect reduced supermarket sales as more people ate out following the relaxation of Covid restrictions.

EUR

After losing ground yesterday, the euro is trading flat against the dollar ahead of this morning’s release of inflation data for the eurozone. The Financial Times reported yesterday that European Central Bank chief economist Philip Lane expects the Central Bank to hit its 2% inflation target by 2025, which could lead to the ECB raising interest rates earlier than most economists are forecasting. The report claimed Lane revealed this in a private meeting with German bankers and as the ECB have not made this long term forecast public, it could lead to him facing questions from lawmakers about the report which suggests he revealed unpublished information to a select group of individuals. In the latest poll, Germany’s Conservative Party (CDU) appear to have fallen further behind the Social Democrats. A ruling coalition between the Social Democrats and the Green party may boost bond yields and in turn the Euro from their more fiscally expansive policies.

USD

The dollar benefitted yesterday from the release of economic data from the US. Retail sales for August unexpectedly rose 0.8% in August well above forecasts. Analysts had been expecting a fall of 0.7%. The data showed that the spread of the delta variant had little impact on American consumers. Also beating forecasts was the Philadelphia Federal Bank manufacturing index which came in at 30.7 again, well above the 18.8 expected. Market attention will now focus on Michigan’s Consumer sentiment index released this afternoon.

Economic Calendar

10.00 am EUR Consumer price index

3.00 pm US Michigan Consumer Sentiment Index