The pound is stronger this morning following better-than-expected retail sales data.
In January, the UK saw the biggest monthly increase in retail spending since the lockdown was lifted last spring.
Nonetheless, tensions in Eastern Europe continue to be the main driver of currency movements.
Yesterday, there were reports of shelling in the Ukrainian territory of Donbas, something that Russia and Ukraine appear to be blaming each other for. As such, markets are turning to safe-haven currencies, such as the dollar, causing the euro to feel the pressure.
Later today, President Joe Biden will host a meeting on the Russia-Ukraine conflict with several global leaders.
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GBP: Retail sales rise faster than expected
The pound has strengthened against the euro and the dollar this morning following positive data. However, tensions in Eastern Europe continue to be the main driver of currency movements.
Russia continues to deny plans to invade Ukraine, accusing the West of hysteria, but is yet to show signs of withdrawal. US President Joe Biden has said Russia is looking for an excuse to invade and the US Ambassador to the UN said: “the evidence on the ground is that Russia is moving toward an imminent invasion. This is a crucial moment”.
This morning, retail sales have rebounded sharply and faster than expected, rising 1.9% in January, despite the rising cost of living. Much of this rise was a result of increased spending at non-food stores such as household goods and garden centres.
GBP/USD chart over past year
EUR: ECB official warns against overreacting to inflation
The euro has weakened against the pound but is trading around similar levels against the dollar this morning as markets keep an eye on Russia-Ukraine headlines.
Yesterday, there were reports of shelling in the Ukrainian territory of Donbas, something that Russia and Ukraine appear to be blaming each other for. As such, markets are turning to safe-haven currencies, such as the dollar.
Thursday afternoon also saw European Central Bank official, Philip Lane, speak. He reiterated the ECB’s dovish stance on monetary policy, suggesting that overreacting to high near-term inflation could result in “an excessive monetary tightening that pushes inflation persistently below the 2% target over the medium term”.
USD: Markets unimpressed by US data
The dollar is still benefitting from its safe-haven status, trading higher against the euro, as uncertainty remains in Eastern Europe.
Despite a flurry of data releases in the US yesterday, there was little reaction from the markets.
The number of Americans filing for unemployment missed expectations, rising by 23,000 last week compared to the previous week. The Philadelphia Fed Manufacturing Survey also missed expectations, coming in at 16, far below the previous reading of 23.2. On the other hand, January building permits beat predictions, rising by 0.7%.
Later today, we will see data for existing home sales, several Fed officials will speak and President Joe Biden will host a meeting on the Russia-Ukraine conflict with leaders of Canada, France, Germany, Italy, Poland, Romania, Britain, the EU and NATO.