UK Retail Sales Set to Slump

21 April, 2017

UK Retail Sales Set to Slump

Our prop desk has opened a series of short EUR positions in the last 24 hours, with the potential for an upset in the weekend’s first round of the election looming. Short equity index trades however continue to frustrate the desk.

Again it’s a relatively light day in terms of economic data but the French election will be front of mind for many traders. We have a real risk of upset here and the point to watch for is whether we end up with two anti-Euro candidates going into the run-off vote next month. To this extent a degree of de-risking of Euro positions would present little surprise in the hours ahead.

At 8.30am GMT we have the UK retail sales print from March set for release and this is expected to show contraction on a month-on-month basis. On the basis that the IMF upped their growth forecasts for the UK on the basis that retail spending hadn’t dried up as expected in the wake of the Brexit vote, there’s a chance that the market is being too pessimistic here, although the late timing of Easter is also likely to have some bearing on the number. With the idea that investors will be looking to shy away from Euro exposure in the run up to the weekend break, this could present further downside for EUR/GBP.

Eurozone manufacturing and services PMI readings are due for release at 8am GMT today and both numbers are expected to come in well above the break-even 50 mark. However, any weakness here could be jumped upon by those lining up short Euro positions ahead of the weekend break. There’s already growing interest in the options market for protection against a dramatic plunge in the value of the Euro off the back of the elections, so even a modest wobble here could heap downside pressure on the underlying currency.

Oil prices have failed to recover from Wednesday’s inventory driven sell-off, despite murmurs from Opec members that fresh production cuts may be on the table. There’s some concern that any move like this could be rather short lived, and on the assumption that we will see another jump in the Baker Hughes rig count when that is published at 5pm GMT this afternoon, there’s still justification for further downside pressures on crude. The $50 level has held right through the month so far, but the rebound we had eyed from Wednesday’s sell-off is showing no signs of materialising.

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