Daily Market Report 21/06/2013

Whilst the Feds plans to reduce quantitative easing remains the headline talk in the markets, encouraging data from the UK retail sector caused the pound to steal some of the US dollars thunder.

Retail sales in May surpassed expectation and rose from -1.2% to 2.1% causing the pound to gain across the board and notably erasing the losses incurred against the US dollar following the Feds monetary policy statement on Wednesday night.

Despite better than expected Markit PMI manufacturing and service sector figures yesterday morning, the euro struggled to make gains against both the pound and the US dollar as events in the UK and the US seem to dictating euro moves.

Data from the US was fairly mixed yesterday. The number of people filing for jobless claims increased by 18,000 to 354,000, Markit manufacturing PMI fell below an expected 52.5 coming in at 52.2. Better news was revealed from existing home sales which showed an improvement to 5.18 million from 4.97 million and from the Philadelphia Fed manufacturing survey which showed an improved figure of 12.5.

With regards to Bernanke’s comments on the reduction of quantitative easing in the US, a recent Bloomberg survey of 54 economists suggests that the Fed will start tapering QE in September with an end to QE by June 2014. If this indeed comes into fruition we could well see the lows that we saw in May, around 1.50.

Data released this morning has shown that the UK public sector net borrowing showed a surplus of £10.533bn, but the data has had little impact on the pound.

Looking ahead to today there is very limited data with only Canada in focus.

Key Announcements:

13.30pm – CAD – Consumer Price Index (May): Expected to rise to 0.9%.

13.30pm – CAD – Retail Sales (Apr): Expected to improve to 0.3%