UK Retail Sales and Flash PMIs at a Glance
EEuropean markets had a decent rebound yesterday, helped in large part by an equally resilient performance in US markets, with the Nasdaq hitting a two-week high, as US stocks broke a three-day losing streak.
Today’s European opening appears to be cautious but positive, and somewhat characteristic of this week where we have seen sharp moves lower and lower, as investors indecisively grapple with the direction of the next move. , caught between optimism about the economic reopening and worry that central banks are acting too late to cope with an inflationary surge.
As we look forward to the day ahead, the main focus will be on the latest flash PMIs for May, from France, Germany, UK and US. Prior to that we have UK retail sales for April.
Retail sales in the UK have slowly recovered from the sharp drop of -8.2% seen in January figures, resulting from the total freeze imposed at the start of the year.
Since then, we have seen a slow and steady recovery with a 2.1% rise in February and then a 5.4% rise in March mainly due to people buying at garden centers and DIY centers, resulting in a 16% increase in households. goods.
Clothing sales also rebounded in March, with consumers considering further easing measures in April, along with higher fuel sales as people started to move more. The new easements seen in April should see retail sales growth continue with expectations of a 4.5% increase in the monthly count and an annualized surge to 36.8%. As for the annualized number, one should not forget that retail sales fell off a cliff this time last year, so there will be considerable base effects in today’s number. hui.
The direction for April retail sales should be for an equally positive number following the 12e April’s easing measures, which was confirmed by a sharp rise in recent BRC retail sales figures, which showed a decent improvement in April.
We also have the latest flash PMIs for May which, if recent April numbers are any guide, are likely to be positive as well.
April’s PMIs painted a solid picture with services activity hitting a six-and-a-half-year high at 61, while manufacturing rose to 60.9, an eight-month high.
UK businesses were reporting higher demand for goods and services, which in turn drives cost inflation, while the job market also looks good, with companies being encouraged to hire additional staff at an ever-increasing rate. seen for over three and a half years. years. Today’s flash PMIs are expected to be just as positive, with services activity rising to 62.2 while manufacturing is expected to hold steady at 60.8.
Overall, optimism is high with the only question being whether what we are seeing is sustainable through the summer.
In Europe, the situation is also starting to look a little more positive, but France and Germany still face a number of headwinds that the UK economy has managed to overcome. Its immunization programs are slightly behind schedule and their infection rates are higher.
We’re starting to see slow improvements here, especially in PMI services, but the picture is patchy. The manufacturing sector continues to stand out, with Germany and France maintaining their recent resistance in April with only a slight softening to 66.2 and 58.9 respectively.
Services still lag far behind and, although there have been attempts to reopen parts of their economy, high levels of infection continue to act as a drag.
Thankfully, the immunization program, especially in Germany, is gaining traction, but that hasn’t stopped economic activity from declining in the latest April figures which saw modest declines to 49.9, while the French economic activity improved slightly from 48.2 to 50.3. With large parts of the German economy locked in until June, we could see modest improvement, but we don’t expect it to be strong with a reading of 52 expected. France should arrive at 53, against 50.3.
The latest US flash PMIs for May are expected to retain their recent resilience, with manufacturing and services expected to sit at 60.8 and 62.2, respectively.
EURUSD – still has resistance in the 1.2250 zone yesterday, corresponding to the peaks observed at the end of February. If we cross the 1.2250 it opens the prospect of a return to the 1.2345 level. A failure pleads for a return to the 1.2040 zone.
GBPUSD – still struggling to overcome the 1.4200 area, but a break above opens the prospect of a move to the 2018 highs at 1.4375. Failure to overcome 1.4240 maintains the bias towards 1.4000.
EURGBP – continues to be capped at 0.8640 area, which maintains the bias on the downside, with the potential to retreat to 0.8560 area for a break below 0.8600. Above 0.8640 opens the prospect of a move towards April highs at 0.8730.
USDJPY – feels vulnerable to a move below trendline support from January lows at 108.60. You have to go back above 109.80 to get back to 111.00. A move below 108.00 opens the prospect of a return to 106.80.