The day after Theresa May suffered another Brexit defeat to further weaken the chances of the European Union offering concessions, we received some much-needed good news. Figures released showed that UK retail sales rose in January as shoppers took advantage of the sales that traditionally occur after the festive period. The markets had been expecting a 0.2% increase, but they actually increased by 1% last month.
The figures for December were also revised up, from a 0.9% drop to 0.7%. On an annual basis, sales jumped by 4.2% which is the biggest increase since December 2016. The release followed an upwardly revised 3.1% annual growth in December and came in much better than the 3.4% the markets had been expecting. Interestingly, it is worth considering that average store prices slowed to 0.4% – the lowest price increase since November 2016.
Sterling had been suffering in early trading and dropped below the $1.28 mark as the markets digested the previous evening’s Brexit vote. However, after the UK retail sales rebound, it retraced the early losses to climb higher against the dollar and back above $1.28. The pound also made some gains against the euro, although in truth the day’s range was fairly narrow.
In the early afternoon, we learned that US manufacturing output surprisingly fell by 0.9% in January, which was much worse than the 0.1% increase the markets had anticipated. The figure for December was also revised down to show a 0.8% rise, when a figure of 1.1% had previously been estimated. Industrial production was also disappointing in January, as it fell by 0.6% when an increase of 0.1% had been forecast.
Donald Trump also decided to declare a national emergency to bypass Congress over funding for his beloved border wall. It was one of his main campaign pledges, although he insisted that Mexico would pay for the wall. As it is, if he gets his way, the American public will pay for it. It looks as if he will face legal proceedings which would then be tied up in court for months. This situation looks set to run and run.
For perhaps the first time that I can remember, there is so little on today’s schedule that there isn’t even a showing. So, the quietest start to the week ever then. However, things pick up on Tuesday, when we will see unemployment figures, average earnings and labour productivity in the UK. In Europe, we will see the all-important ZEW economic sentiment indices from Germany and the eurozone, as well as December’s construction output from the eurozone.
Take advantage of this lull to consider how you’ll protect your budget for any upcoming transfers. A forward contract locks in a fixed exchange rate for up to twelve months – speak to your Personal Trader on 020 7898 0541 to find out more.