Global risk appetite recovered briskly last week and this theme has extended in the past 48 hours. The S&P hit a new all time high of 3,352 yesterday and the Nasdaq is now up 7.3% year-to-date. The Shanghai Composite equity index has closed higher for sixth consecutive sessions and gained 5.7%. This backdrop has continued to benefit the US Dollar, with the trade-weighted index broadly stable at a 2-month high for the past three consecutive trading sessions.
The GBP/USD cross temporarily traded below 1.29 in early trading before staging a mini comeback. However, a weak BRC retail sales report for January seems to have cut short any meaningful Sterling rally. UK retail sales were up only 0.4% yoy in January, dashing hope of a meaningful post-general election recovery in consumer demand. The Euro has fared even worse, with EUR/USD dropping to 1.09 – its weakest level since 1st October.
The Australian Dollar made further small gains in Asian trading following the release of in-line with expectations NAB business confidence data. However there has been no such relief for the Kiwi Dollar which has depreciated a further 0.3% in trade-weighted terms since Friday to a 12-week low.
