Daily Analysis: Markets Digest CPI and Retail Sales Data

Our daily analysis of EUR, GBP and USD.

DAILY ANALYSIS

USD

• US Retail Sales increased in December as Households bought motor vehicles and a range of other goods, pointing to strong demand in the economy and further reinforcing the FEDs cautions approach to Interest rate cutting.
• Overall consumer prices increased by the most in nine months, Labor market strength is driving spending through higher wage growth.
• Sentiment surveys have suggested consumers could be rushing to purchase goods in anticipation of tariffs.
• Martin Luther King day on Monday mean US markets will be shut; all eyes will be focussed on the inauguration of President Trump.

EUR

• The key EU releases in what has been a quiet week for the single currency have come towards the back end of this week in the form of inflation data.
• German CPI reported yesterday morning in line with both expectation and previous at 2.8%.
• This morning Core HICP and HICP will release at 10am with Core expected to uptick a tenth of a percent to 2.8% whilst HICP is set to remain in line with previous at 2.4% YoY.
• The Euro remains range bound against both its G3 counterparts with GBP/EUR still in the 1.18’s and EUR/USD in the 1.02’s

GBP

• Sterling fell this morning after UK retail sales disappointed, dropping -0.3% against an expected 0.4% MoM increase for December.
• Retailers, burdened by rising National Insurance contributions and the National Living Wage, are likely to pass on costs to consumers, driving renewed price inflation.
• Sluggish Retail Sales indicate UK consumers are pulling back, heightening risks to economic growth and raising the likelihood of a BoE rate cut early next month.UK CPI Surprises with Cooler Data Ahead of US CPI Release

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