GBP

Sterling continued its losing streak against a rampant dollar yesterday, which continued to gain momentum from safe-haven flows. The pound was hurt further by the latest monthly Distributive Trades Survey from the Confederation of British Industry’s (CBI) which showed that retail sales in the UK have declined significantly from typical levels this month. The survey, which included 108 companies, showed this month’s retail sales volumes dropped by 35% compared with 9% last month, representing the first fall in 13 months. CBI chief economist Martin Sartorius said, “retail sales were below seasonal norms in April as consumer spending continued to shift back towards services and rising prices impacted households’ spending power”. Adding, “rapid inflation means that the cost-of-living crisis is going nowhere soon”. Further evidence of a slowdown in retail sales came this morning when Sainsbury followed market leader Tesco in warning shareholders that soaring inflation would lower profit in the current year.

EUR

The euro has recovered slightly from its lowest level against the dollar since January 2017. The single currency has lost over 5% against the greenback this month and is on track for its worst monthly performance since early 2015. Russia’s move to cut off gas supplies to Bulgaria and Poland is the latest blow for the currency and the EUR/USD one month option market moved sharply on Wednesday implying there could be more weakness to come. The ratio of “call” options on the euro compared to “puts” almost halved yesterday from Tuesday to -1.8, the lowest this month. Call options confer the right to buy an asset while puts enable the holders to sell. This morning’s release of German inflation data and economic sentiment surveys for the bloc will be closely scrutinised by traders and may supply some impetus for the beleaguered currency.

USD

The relentless dollar buying over the past week continued in Far East trading sending the US dollar index above 103.00, to its highest level in five years, helped by the Bank of Japan who released a “dovish“ statement overnight. The greenback is now trading at its highest level in more than 20 years against the yen. The dollar’s surge may be kept in check this morning ahead of the release of US Gross Domestic Product (GDP) data later today. The GDP price index is followed as an indicator of inflationary pressure and its release comes less than a week before the Federal Reserve Bank meet where they are expected to confirm market expectations of a 50-basis point hike.

Economic Calendar

10:00 EUR Consumer Confidence
10:00 EUR Business Climate
13:00 EUR GER Harmonised Index of Consumer Prices
13:30 USD GDP annualised
13:30 USD GDP Price Index