Global risk appetite today found its footing, with the Euro, Sterling and Australian and Kiwi Dollars making very small gains versus the higher-yielding Dollar and the more traditional safe-havens of the Japanese Yen and Swiss Franc. European also posted modest gains.
But level-wise these currencies remain far weaker versus the Dollar compared to a week ago. Sterling got little real support from better-than-expected retail sales data for July. The volume of retail sales rose 0.7% mom (versus +0.2% mom expected) and a solid 3.5% yoy, thanks in part to strong food and beverage sales during the World Cup and to on-line sales.
For starters UK retail sales account for only about a third of the broader measure of household consumption. Moreover, there is some evidence that that domestic households, faced with stagnant real wages, are drawing down savings to fuel their expenditures. Perhaps more importantly, markets seemingly remained unconvinced that stronger monthly UK macro data will lead to another Bank of England rate hike before year-end.
