- Posted by currencies in Bank of England, Currency, Dollar, EUR, Fed, GBP, Inflation, Rate Cuts, Retail Sales, Sterling, UK, Uncategorised
- March 24, 2023
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This morning we had the UK retail sales data released, which rose for the second consecutive month in February by 1.2%m/m, following a 0.9% rise in January (revised from 0.5%).
Indeed, the outturn was stronger than expectations of 0.4%, and the market consensus of a 0.2% rise.
Despite the positive start to 2023, the downward trend in retail sales volumes remains in place. For the three months to February, retail sales fell 0.3% meaning sales volumes were 0.5% below their pre-pandemic level, despite being 14.6% higher in value terms over the same period.
While the backdrop for consumers should continue to improve as the year progresses – supported by a sharp moderation in inflationary pressures and from lower energy prices following the news that the government’s energy price guarantee will not rise to £3,000, from its current £2,500 level, and in April benefits and the national living wage will rise significantly – the overall outlook remains challenging.
The euro fell sharply against a strengthening dollar amid nervousness over banks, with better-than expected economic data failing to lift sentiment.
Flash Purchasing Managers’ Index (PMI) data failed to lift the single currency as sentiment in markets were fragile with European banks falling 5.3%.
S&P Global’s flash Composite Purchasing Managers’ Index (PMI), seen as a good gauge of overall economic health, bounced to a 10-month high of 54.1 in March from February’s 52.0, data showed on Friday.
That was well above the 50-mark separating growth from contraction and above all forecasts in a poll.
The pound touched a seven-week high of $1.2341 yesterday in volatile trading after the Bank of England raised interest rates by 25 bps, but said a surprise resurgence in inflation would probably fade fast, stoking speculation it had ended its run of hikes.
The Fed on Wednesday raised interest rates by 25 basis points, as expected, but took a cautious stance on the outlook because of banking sector turmoil even as Fed Chair Jerome Powell kept the door open on further rate increases if necessary.
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