With less than a fortnight to go until the election, sterling remains remarkably resilient. Yesterday’s rather damp retail sales number did little to damage to the pound as it continued to make gains above 1.50 against the USD.
Despite the run of above-inflation-pay growth that UK consumers have enjoyed through the past six months or so, retail sales grew poorly through March. Analysts were quick to blame the election for the fall off.
While the election may have had a slight effect on confidence, the larger issue remains that consumers are not as wealthy as they used to be. Retail, and spending within the retail sector, is a confidence game wherever you are. The difficulty for us economy watchers lies in where this confidence comes from and, for most Western economies, it is simply about wages.
Eurogroup meeting today
Confidence is something I wish that the market had in Greece. Yesterday saw euro rally across the board as headlines from the Eurozone suggested the possibility that Greece may be closer to a deal with its creditors than had been originally thought. These comments came from an unnamed Greek minister and therefore should be taken with a Parthenon sized pinch of salt, and there is a greater chance of me becoming the leader of the SNP than there is of a deal today in Riga.
Rumours that Greece may be eligible for an extension of its June deadline were largely dismissed as rubbish. Greece will dominate today’s markets and those of the next few months and next week we will be holding a webinar to explain what we think could happen through the summer. Look out for the invitation in your inbox later today.
Asia waiting on China
Elsewhere the focus has once again moved back to Asia. Noises from China have remained poor and the prospects for the wider Pacific depend very much on what the People’s Bank of China decides to do. Japan has sat there with no wage driven inflation for years now despite the QE program that the Bank of Japan have gone for. If China loosens policy more than tinkering with the ratios that banks can lend, then everyone else in Asia is likely to follow suit. Exports and industry in this region are a lot more price sensitive and a weakening yuan will not be looked on kindly by companies within Japan, Thailand, Singapore and elsewhere.
