US retail sales disappoint, despite rebounding after bad weather

Enrique Díaz-Álvarez15/Apr/2015Currency Updates


Weak retail sales data in the US caused the UK currency to climb against Greenback on Tuesday afternoon, finishing trading 0.7% higher.

As expected price growth remained static again in the UK last month. The level of inflation, measured using the consumer price index, stood at zero for the second consecutive month in March as a fall in gas and clothing prices were offset by higher fuel costs. Significantly, the core inflation level, which strips out volatile elements such as energy and food, declined to its lowest rate in nine years of just 1%, down from 1.2% a month before. Despite avoiding outright deflation for another month, price growth in the UK still looks set to edge into negative territory in the coming months, and is likely prevent an interest rate hike from taking place in the UK in 2015.

In a busy morning, the Office for National Statistics announced that price changes of goods produced by UK manufacturers declined by 1.7%, while the DCLG house price index rose by 7.2% YoY in March. The Conservative party also released its manifesto with just over three weeks to go until the General Election.

A relatively subdued day in the UK today means Sterling volatility will depend mostly on events in the US and Eurozone.


The single currency soared on the back of news from the US, ending the London session 1.1% higher against the Dollar.

The recent rebound in economic performance in the Eurozone continued on Tuesday after it was announced that industrial production data jumped significantly more than expected in the Euro-area in February. According to Eurostat, industrial production rose by 1.1% month on month and by an annualised 1.6%, the strongest yearly gain since January 2014. Expansion in production was across the board, following monthly gains in the production of energy, capital goods, durable and non-durable consumer goods. In other releases, inflation in Italy remained negative at -0.1%, while the IMF raised its growth forecasts for the Eurozone from 1.2% to 1.5% for 2015.

Today will see the announcement of the ECB’s interest rate decision for April, followed by the press conference with President Mario Draghi at 1:30pm. While we expect Draghi to acknowledge the improvement in the Eurozone economic performance, the central bank is likely to make today as uneventful as possible. However, as always, post-statement volatility is not to be ruled out.


The Greenback depreciated by 0.85% against its major peers yesterday after retail sales for March missed expectations.

Despite posting its strongest month on month increase in twelve months, retail sales figures disappointed expectations on Tuesday. Sales climbed by 0.9% in March, marking the first monthly increase since November, although this was below the 1.1% increase that was forecast and failed to reverse even half of the prior three months’ weakness. Core retail sales, which exclude sales in the automobile sector, also disappointed, rising by just 0.4%. However, yesterday’s rebound provides evidence that the US economy is bouncing back after bleak winter weather caused generally softer economic performance in the first quarter.

Elsewhere, the producer price index remained negative at -0.8%, despite climbing by 0.2% month on month, while the Johnson Redbook Index declined to over a two year low at 1.1%. US business inventories also rose slightly more than forecast, up by 0.3% in February, partly due to a notable increase in retail inventories.

An array of second-tier data releases in the US today will begin with mortgage applications at midday followed by industrial production and capital utilisation later in the afternoon.

Rest of the world

The Russian Ruble continued to appreciate yesterday, supported by the stabilisation in oil prices. The currency climbed by 2.4% during the day and is currently the world’s best performing currency so far this year, having gained 14.8% since 1st January.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.