Rational FX: UK’s BRC retail sales monitor indicate retail sales are low [12/01/2011]

Yesterday’s Market Movers

• There was no data in the Euro Zone yesterday.
• In the UK yesterday we had the BRC retail sales monitor YoY, which came out much worse than previous at -0.3%, meaning that retail sales are low, this was expected for last month because of the poor weather conditions however with it down on last year it shows us that the UK recovery may be a longer slope than we thought with consumer confidence lower than expected.

Today’s Market movers

• In the UK today is BRC shop price index which is previously at 2%, this can be seen as an inflationary piece of data which will have a knock on effect to interest rates when the BOE have their next rate setting meeting.
• UK Total Trade Balance for November is expected to come out much worse than previous at -£8.2B. This shows that we imported more than exported and could be a direct result of Pound strength! It could also show that there is more domestic demand for products.
• Industrial production is expected to come out slightly worse than previous YoY and MoM, this shows that production has slowed down over the last year, however for the last month it could be expected due to the poor weather conditions the UK has faced so this may have little effect on the market however the YoY figure may see sterling weaken because it shows that the recovery in the UK is not as strong as we would hope.
• In the USA we have the MBA mortgage Applications which is considered a leading indicator for the U.S Housing market, with this figure coming out positive it shows a healthy housing market for the USA, which provides good stimulation for the rest of their economy as it show banks are starting to lend money again.
• Also in the US today we have the Import Price index MoM and YoY. MoM it is expected to come out slightly less than previous at 1.2%, however this could also be due to the lack of demand for imports in the poor weather conditions because of the worry to weather the goods would not arrive on time, this may take little effect on the US economy and the US dollar. YoY however is expected to come out 1% better than last meaning that demand for imports from the US is growing, showing possible growth to the US economy which could lead higher inflation, higher rates and eventually a stronger USD.
• The FED’S beige book reports are the last piece of data today. This will be a key indicator on the USA’s current economy situation and an optimistic report could have a very positive effect on the whole US economy’s confidence and could give us some indication whether another round of QE is required.