Intraday Market Thoughts

UK Retail Sales Seen Lower

by Kyle Morrison
Sep 15, 2011 8:57

UK retail sales expected to slide on August riots, thereby increasing speculation of further QE, Europe set to remain in focus in the wake of last nights Merkozy teleconference, EZ CPI expected to remain at 2.5%, Swiss rates expected to remain unchanged, US manufacturing and CPI data could give clues with respect to next weeks FOMC. Get the LIBOR SPREAD charts from the latest PREMIUM Intermarket Insights (see link below).

GBP continues to be weighed down by disappointing figures showing the UK economy is in danger of grinding to a halt and contracting in Q3. Given last month's social unrest the latest retail sales data for August arent likely to offer much respite with expectations for a decline of 0.2%, month on month, and year on year. It wouldnt be surprising however if the figures came in much worse that expectations, and if they did it would certainly add to the pressure for action on the doves side of the argument for more QE.

Europe is set to remain in focus despite last nights declaration by France and Germany that Greece belongs inside the euro zone. It is hard to feel that markets will be convinced by words given that they have rarely been backed up by actions at any stage in the course of this crisis. Greece has been urged to plough ahead with its reforms and fulfil its obligations, while Italy finally passed its 54bn austerity budget.

Both governments face huge political obstacles in actually implementing the measures given a backdrop of slowing and/or negative growth.

Todays August CPI figures are expected to remain unchanged from Julys 2.5%, and underscoring the fact that the next move in rates for the ECB is likely to be lower.

In the wake of recent monetary policy decisions the Swiss National Bank is expected to leave interest rates unchanged and reaffirm its determination to weaken the franc. This is especially in light of yesterdays sharp fall in import prices, as markets remain reluctant to test the banks resolve with respect to the peg at 1.20 against the euro.

This afternoons release of August US CPI data, as well as the September empire manufacturing and Philadelphia Fed manufacturing survey could well raise or lower expectations as to the likelihood of further measures, or otherwise by the Fed at next weeks FOMC meeting. Particular attention will be on those two manufacturing numbers and some form of recovery given the abysmal readings in August.

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