FX markets, which remain open today (Easter Friday), woke up from their slumber yesterday. The Dollar trade-weighted index appreciated to its strongest level in in ten sessions, thanks to a combination of strong retail sales and labour market data. Retail sales growth, which had slowed in recent months, rebounded sharply in March. The value of retail sales rose 1.6% mom – its fastest pace of growth since October 2017. Moreover, the number of Americans filing applications for unemployment benefits dropped to its lowest in nearly 50 years last week (1.653 million).
This Dollar strength saw the GBP/USD cross temporarily fall below 1.30 – price action witnessed on only a few occasions in the past two months – and this despite the UK also publishing strong retail sales data. The volume of retail sales rose 1.1% mom in March – the fastest pace since last April – while the year-on-year rate surged to 6.7% (although this figure was partly distorted by very weak retail sales last March due to adverse weather conditions).
There was no such relief for the Eurozone, with preliminary data showing that the composite PMI – a reliable forward-looking indicator of economic growth – fell to 51.3 in April from 51.6 in March. The bottom line is that while GDP growth may have edged a little higher (or at least stabilised) in Q1 2019, albeit at lacklustre levels, it has made few inroads early in Q2. EUR/USD dropped to 1.123 yesterday evening – a level last traded on 8 April – The GBP/EUR cross remains broadly unchanged just above 1.155.
