UK spending not as bearish as expected
The UK consumer continues to show resilience in the face of political tensions surrounding Brexit and what this has done to the government. Retail sales were expected to fall by 0.3% in April after a strong month in March and indeed over the first quarter of the year. Instead, we saw a flat reading, with the annualised spending rate at 5.2% vs 4.6% expected, though this was down from 6.7% previously.
Even so, the negative effects of Brexit are not as bad as predictions have suggested, though this week, though there have been casualties - British Steel for one.
Markets are now turning their attention to the PM speech after Theresa May speaks with her backbenchers - the 1922 Committee - with a statement expected thereafter when she is thought to be outlining her departure timetable. As we have already stated, this is expected to be in the week beginning 10 Jun.
There was no real reaction from GBP to the numbers, with Cable still trading a narrow range in the mid 1.2600's. There is room here for a modest push up, but we note resistance at 1.2690, 1.2715-20 and then 1.2770-75, which may well hold into the weekend.
EUR/GBP in the meantime is still trying to push up through the 0.8840-50 zone, but after a number of failed attempts, dip buyers are not giving up and the recent surge in EUR/USD is adding confidence here. Only a break under 0.8790-85 will defer another imminent challenge - 0.8725-10 thereafter.