UK Retail Sales Exceeded Expectations

August 16, 2013

The pound reached 8-week high on Thursday Vs dollar and 6-week high Vs euro after the release of UK retail sales report which considerably exceeded the expectations. Retail sales in July rose by 1.1% compared with the prior month while an increase by 0.7% was expected. Retail sales in July grew for the third month in a row, which was recorded for the first time in 3 years. Retail sales grew by 3% at an annual rate (Consensus +2.4%) – it is the fastest growth rate since January, 2011.

The US dollar dropped on Thursday against most major currencies amid the release of macrostatistics data which mostly were negative although the dollar made attempts of growth at first after the release of strong unemployment claims data. Unemployment Claims in the USA fell more than expected last week – by 15 thousand to 320 thousand – the lowest level for more than 5 years since early 2008.

But all the other data on the capital inflow, industrial output and manufacturing PMI turned out worse than expected. Thus, foreign investors sold a net $81.6 billion in US long-term treasury bonds and bills in June, which turned out almost twice more than the last record level documented in May. Industrial output didn’t change in July compared with the prior month while its growth by 0.3% was expected. June growth was revised downwards to 0.2% from 0.3%.

Empire State Manufacturing Index dropped to 8.24 in August compared with 9.46 in July Vs expected growth to 10. A more important Philadelphia Fed Manufacturing Index also dropped more than expected – it fell to 9.3 in August against 19.8 in July while a drop only to 15 was expected. Consumer Price Index turned out as forecasted; and only NAHB Housing Market Index has risen significantly. FOMC member James Bullard who made a speech on Thursday repeated again as he did on Wednesday that the Fed needed more data to examine before taking a decision concerning bond purchase decrease.      

Stock market fall, 10-Year Treasury Note Yield growth to 2-year high and a sharp rise of the gold also influenced dollar’s weakening. The yen grew significantly on Thursday amid a sharp decline of stock markets and Nikkei future. Stock index DJIA closed at a maximum fall since June, 20 by 1.47%.

New Zealand dollar reached 3-week high on Thursday on the back of manufacturing PMI increase to its high since June, 2004. Business NZ Manufacturing Index grew to 59.5 in July compared with 55.2 in June. Consumer confidence also grew - ANZ Consumer Confidence Index rose by 2.7% in August to 123Vs its decline by 3.3% prior month.

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