GBP stronger on retail sales optimism; US data disappoints; no rate guidance from Fed Vice Chair Fischer as he avoids issue in latest speech

By Raiko Shareef

The USD leaked very modestly lower, but by less than 0.3% against most of the majors.

The GBP outperformed after a very punchy retail sales report.

The swathe of US data releases overnight was disappointing, but not enough to materially deepen fears of economic malaise.

The trio of manufacturing indices (from Markit, and the Chicago and Philly Feds) all undershot expectations.

Existing home sales unexpectedly fell, and initial jobless claims rose (though the latter continues to fall in trend terms).

Fed Vice Chair Fischer chose not to speak about the US economy or policy outlook at a central banking conference in Europe, disappointing investors looking for an update on the FOMC’s views.

UK retail sales jumped by 1.2% q/q, far outstripping even the more optimistic estimates. The ONS reported a big contribution from clothing purchases, on the back of unusually warm weather. GBP/USD jumped sharply, and is up by 0.9% to 1.5670.

NZD sits in the top half of performers against the USD overnight. Yesterday’s Budget was bereft of surprises, and failed to make any impression on the currency.

NZD/GBP has broken down to fresh four-year lows, as GBP outperformed. Having dipped to 0.4660 overnight, it has recovered very modestly. The next line of support lies at 0.4630. We pick a return toward 0.49 through the year, on the premise that the RBNZ does not deliver rate cuts in 2015.

Tonight, Germany’s IFO survey and US CPI will be data highlights. But most of the attention will centre on Fed Chair Yellen’s speech on the economy, to be delivered in the early hours of tomorrow morning.

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Kymberly Martin is on the BNZ Research team. All its research is available here.