A quiet overnight session in FX markets with few tier-1 macro data points due out today. The Euro and Australian Dollar have made small gains and Sterling is broadly unchanged despite VISA spending data for the UK released yesterday pointing to weak consumer spending in April. Total UK sales (adjusted for inflation) were down 2.0% yoy, following a 2.1% yoy contraction in March. This suggests that retail sales were at best soft in April and that the broader measure of household consumption growth slowed quite sharply in Q1 2018, which would corroborate with the collapse in GDP growth to 1.2% yoy, and in early Q2.
Bad weather in February-March and timing of Easter in April this year may have at the margin negatively impacted consumer spending during these three months. However, the underlying trend for UK consumer spending is weak as a result of flat-lining real wages, the collapse in bank lending and fall in consumer confidence. This does not bode well for Q2 GDP growth unless consumption rebounds sharply in May-June and could it make harder for the Bank of England to justify a rate hike at its 2nd August policy meeting.
