Strong retail sales boost chance of Federal Reserve rate hike

Enrique Díaz-Álvarez12/Jun/2015Currency Updates


Despite some impressive retail sales data in the US, the Pound rose against the Greenback yesterday by 0.25%.

There were no major data releases in the UK on Thursday, with most volatility in Sterling down to external factors. There was little market reaction to Mark Carney’s speech on Wednesday. This was unlike a year previous, where the Bank of England Governor sent the Pound soaring on comments regarding the timing of a UK rate hike. Carney disappointed by giving no clues over the future path of monetary policy. Elsewhere, the Office for Budget Responsibility (OBR) warned that further cuts in government spending would be needed in order to bring the country’s national debt under control.

A lack of major announcements in the UK means attention will turn to the crucial inflation figures on Tuesday, and Bank of England minutes on Wednesday.


Greece concerns late in trading yesterday and a strong Dollar caused the Euro to end 0.65% lower for the day.

There were mostly second-tier economic releases in the Eurozone. Critically for Greece, its jobless rate increased once again, heaping further pressure on its government. The unemployment rate for the first quarter rose from 26.1% to 26.6%, with just shy of 72% of those unemployed now out of work for 12 months or more. Over in France, inflation ticked upwards in May, with the headline rate increasing by 0.2% for the month, and by 0.3% on an annualised basis.

In Greece, stocks had a very up and down day. Greece’s stock market were buoyed in early afternoon by optimism that an imminent deal would be reached. However, in a dramatic move, the International Monetary Fund withdrew its negotiating team, signalling time for compromise had ended. It appears that patience among creditors has run thin, indicating a possible “take it or leave it” stance from the IMF with regards to its proposed reforms.

The back and forth in Greece will remain in the headlines today. There are a number of data releases to look out for as well, notably Eurozone industrial production and Spanish inflation this morning.


The Greenback was bolstered by impressive retail sales figures for last month, climbing by 0.45% against its major peers.

Retail sales for May surged above forecasts, with households in the US increasing purchases over a range of goods. The crucial sales figure increased by 1.2% last month, including a 0.2% upward revision of the April number. The core figure, which excludes purchases of automobiles, was equally as impressive, climbing above forecasts to 1.0% growth. Such a strong pickup in sales gives yet another clear indication that the contraction in first quarter growth in the US was a consequence of the poor winter weather and a statistical abnormality, rather than a more underlying economic slowdown. The data will be additional good news for Federal Reserve hawks following last week’s labour data, and boosts the prospect of an interest rate hike in the US at either the July or September meeting.

Weekly jobless claims disappointed expectations, although remained strong once again last week. The number of individuals claiming unemployment benefits in the US rose to a seasonally adjusted 279,000, although marked the fourteenth straight week that claims were below the 300,000 threshold level.

Market fallout from the strong retail sales yesterday will likely continue into today. This will be supplemented by the producer price index at 1.30pm and the Reuters consumer sentiment index at 3pm (both BST).

Rest of the world

Japanese government officials claimed yesterday that the remarks made by central bank Governor Kuroda were not in an effort to reverse the currency’s decline. Elsewhere, the Nigerian central bank further altered its Naira peg against the US Dollar.


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.