UK spending surprises to the upside again - public borrowing also lower
Amid the fears over Brexit, the UK consumer stays resilient to the last and in the Fed data, we saw retail sales rising 0.4% on the month, completely against the forecasts of a fall of -0.3-0.4%. Year on year, sales are up 4.0%, with core retail sales up 3.8%. Strong sales in online sales and fuel have been largely behind the strong numbers and continue to go against some of the notions that Brexit fears are restraining activity.
Public spending requirements are also lower than expected - coming in at -£660mln vs -$300mln expected.
However, the effects of leaving the EU may still come to pass later down the line, so traders are not ready to put full faith in the data just yet, and as we have seen, developments in Brexit - and more so avoiding a no deal outcome - are what drives GBP for now.
Cable only managed to reach the mid 1.3200's in last night's USD sell-off, so there is clear nervousness over the week ahead, with next Friday still the official date that the UK is set to leave the EU. The EU Summit today could agree to the extension requested by PM May, who has asked for the withdrawal date to be pushed out to the end of June. The EU wants to shorten this to 22 May, just ahead of the European elections, which the UK wants to sit out.
Gains in EUR/GBP this morning have also reflected Brexit nervousness, and the cross rate is still trying to push through the 0.8645-65 resistance zone, yet there is plenty more congestion to work through ahead of 0.8700 also.
Next up is the BoE decision. Few surprises anticipated here.