Daily Currency Update

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Sterling charges higher on the hope of a good retail sales reading today

GBP - British Pound

The pound opens higher this morning with cable making a charge closer to 1.31 and GBP/EUR breaking 1.17. There was little to go off in the economic calendar so the gains we are experiencing are a mix of optimism surrounding a strong retail sales reading later today and a sense of risk creeping back into the markets, following the signing of the US-China trade deal on Wednesday.

Sterling gains will most likely be limited with a 60% chance of a rate cut at the end of the month still hanging over its head. Boris Johnson also hit the wires saying the chances of the trade deal between the UK and EU being wrapped up by the end of the year is looking unlikely. This comment was quite literally echoed from the European Union (EU) Trade Commissioner Phil Hogan, he said ‘we will not get everything done for a UK-EU trade deal by year-end’.

As mentioned above, today's attention will be on the 9.30am release of retail sales. Expectations point towards a 0.5% increase, it will be interesting to see how much of an impact black Friday and cyber Monday had on the sector. A soft read will only affirm recent poor readings across a suite of economic indicators and add mounting pressure on the Bank of England to lower interest rates.

Key Movers

Across the pond, the retail sales report showed sales were reasonably solid in December, but downward revisions to previous months mean that year-over-year growth in holiday spending was not quite as strong as they were expecting. The number highlighted a growth of 0.3% in the sector, matching forecast. Year on year retail spending was up 5.8%, this was a 16 month high. Weekly Jobless claims bettered expectations and unexpectedly fell to 204k and the Philly Fed Manufacturing index jumped to 17 points, an increase of nearly 15 points from the previous month. It would appear that it was a good day at the office for the greenback but data was largely shrugged off. One thing the releases will do is help cool any rate cut fears.

We also had the release of the meeting minutes from the ECB’s December gathering. The text consisted of fairly positive comments stating that the bank remains cautious. It feels like there are mild indications that core inflation is rising and that sentiment has improved over receding global trade tensions, but that geopolitical tensions are "not conducive" to lowering uncertainty.

In other data worth noting, china stepped up. Industrial production grew by 6.9% in December, beating analysts’ forecasts of 5.9% by a big margin to register the fastest rate of growth since March. Retail Sales grew by 8%, bettering forecasts of 7.9% growth, but remained unchanged from November. The fourth-quarter GDP came in at 6% as expected, with full-year growth at 6.1% – the slowest in 29 years.

Expected Ranges

GBP/USD: 1.3040 - 1.3110 ▲

GBP/EUR: 1.1720 - 1.1790 ▲

GBP/AUD: 1.8904 - 1.9004 ▲

GBP/NZD: 1.9650 - 1.9750 ▲