UK retail sales beat expectations this morning, although currency traders largely took the surprise of the data in their wake.
s we thought it might be, sales were much warmer than expected in April, the first period that covers the reopening of Main Street retail stores. The growth figure for retail sales of securities jumped to 9.2% month-on-month (more than double the consensus of 4.5%), with sales also 42.4% higher year-on-year previous, when the UK was in the first nationwide lockdown. Excluding the volatile component of fuels, sales also rose 9% MoM, the third largest increase on record. Clothing sales experienced a particularly astonishing boom, jumping 70% from the previous month.
The British pound briefly bounced off the news, although the move proved short-lived. We believe this is in large part because investors view the economists’ consensus as a very conservative consensus which, like the March figure, massively underestimated the impact of an easing of lockdowns. on consumer spending. All signs point to the UK economy rebounding very well after the slowdown at the start of the year and that a strong recovery is to be expected in the second quarter. This morning’s UK PMI data provided further evidence of this. The services index remained slightly below expectations, although it still hit an almost 8-year high of 61.8, while manufacturing activity exploded to a record 66.1, well above the consensus of 60. With most countries still lagging behind the UK in easing restrictions on viruses, we see room for a further rise in the pound, particularly if the data ahead continue to indicate such a solid rebound in activity.
Eurozone PMI data points to strong second quarter rebound
The dollar was generally weaker against most of its peers on Thursday as investors continue to look past the high US inflation of the past week. EUR / USD climbed back above the 1.22 level, although the pair has found difficult gains to come so far this morning, despite a set of Eurozone PMI numbers. The service and industrial indices both beat expectations, pushing the composite index to 56.9 in May, its highest level since February 2018. Fears of a third wave have subsided and the program With the EU’s vaccination campaign in full swing, investors are equally optimistic about the euro. The zone’s economy is poised to rebound well in Q2 after contracting in Q1. The most important barometer for the EUR / USD will be whether we start to see a narrowing of the economic performance gap between the US and the Eurozone as the latter initiates further loosening of foreclosure restrictions. . US PMI data this afternoon will be a major test of this hypothesis.