Daily Market Digest: UK Retail Sales, ECB, Gold surges

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UK retail sales decline in March showing a slowdown in economic activity in the first quarter. The ECB left interest rates unchanged at today’s meeting. Gold prices gained over 1.0% for the day

Today’s Economic events

  • New Zealand Credit Card Spending y/y 4.80% vs. 7.30% previously
  • Swiss trade balance 2.16 billion vs. 3.89 billion
  • UK retail sales m/m -1.30% vs. -0.10%
  • UK Public sector net borrowing 4.2 billion vs. 5.6 billion
  • ECB Minimum bid rate, unchanged at zero percent
  • ECB Press Conference
  • US Philly Fed manufacturing index -1.6 vs. 8.1
  • US Weekly unemployment claims 247k vs. 265k
  • US HPI m/m 0.40% vs. 0.40%

Coming Up

  • Eurozone consumer confidence
  • BoE Governor Carney speech
  • US CB Leading index

March Retail sales in the UK weaker than expected

Weak economic data continues to plague Britain’s economy. Latest retail sales figures for March, released by the Office for National Statistics (ONS) showed today that Britain’s retail sales fell 1.30% in March, more than the expected 0.10% declines and down from February’s 0.50% declines, which was revised from the initial figure of -0.40%. Stripping the auto fuel, UK’s core retail sales was down 1.60% in what was seen as the biggest decline since January of 2014. On a yearly basis, UK’s retail sales gained 2.70% but missed analyst expectations of a 4.40%.

The latest retail sales data comes just after yesterday’s unemployment data from the UK showed an increase in the claimant count change and underlines the risks of the uncertainty stemming from the UK’s referendum vote on EU membership.

“Continuing a sustained period of year-on-year growth, the volume of retail sales in March 2016 is estimated to have increased by 2.7% compared with March 2015. This was the 35th consecutive month of year-on-year growth.” ~ ONS

ECB leaves rates unchanged

The European Central Bank opted to leave interest rates unchanged. The ECB’s minimum bid rate remained at zero-percent while the deposit lending rate was unchanged at -0.40%. The recently expanded asset purchase program remained at 80 billion euros. The euro which opened on a weaker note yesterday pared losses as the single currency quickly regained the $1.130 handle ahead of the ECB’s press conference. Mr. Draghi opened his statement noting that the ECB would use all the tools within its mandate to achieve the inflation target. He said that QE will run for a sustained period of time, at least until March 20th and beyond if need be.

Inflation rates could turn negative again in coming months, before picking up in the second half of the year. Risks to euro area growth remains tilted to the downside~ ECB President, Mario Draghi

Gold surges, up 1.90%; Silver gains over 3.0%

Gold prices made early gains today after a modest pullback yesterday. From the start of the European trading session, Gold took an early lead breaking above the $1250 handle and continued to push along higher. At the time of writing, Gold is trading at a one-month high of $1268. Silver prices, not to be left behind also gained strongly. Silver prices are up an impressive 3.65% for the day, trading at $17.6. The precious metal’s rally came as the US dollar weakened despite the weekly jobless claims rising 243k, less than expected and posting a 42-year low. It is unlikely to expect gold prices to pull back lower in the near term, as Commerzbank AG analysts say that even if Draghi is open to more rate cuts, it would only help supporting Gold prices to push higher.

“Gold has climbed to around $1,260 per troy ounce this morning in the run-up to the ECB’s meeting. If [Mr. Draghi] shows himself more open to possible further rate cuts, this is likely to support the gold price.” ~Commerzbank AG.

Institutional Call of the day – AUD/USD, Morgan Stanley*

Morgan Stanley expects high-yield currencies to continue outperforming its peers. Analysts at MS suggest that AUDUSD could hit $0.8150, compared to the current rate of $0.7813 and notes that US bond yields have been pushing higher following commodity and risk assets rallying. “Rising bond yields are typical within a reflationary environment as capital shifts from risk-free into higher-return assets.~ Morgan Stanley

AUDUSD (9.155) is up 0.37% for the day.

* Institutional Call of the day is not a recommendation or an endorsement by Orbex.com to buy or sell


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