Backdrop remains positive for Sterling
Well as predicted the good news arrived from UK data last week, but the Pound was unable to make waves on the market. £-$ rates did consolidate and push towards the 1.40 mid-market level, but £-€ struggled and steadily declined as the week went on due to a strong €.
UK retail sales surged in April, even though most economists believed it to be too early in the roadmap to see real results. A reading of 5.4% smashed the 1.5% forecast with a sizeable jump from the clothing sector. Then followed strong UK PMI figures once again with manufacturing coming in at an incredible 27-year high and the composite reading not doing bad either with an 89-month high.
Not to be outdone, the Euro-Zone also produced some good PMI numbers. The composite reading delivered a 9-month high and manufacturing continues at record highs. The main driver behind all of the data is Germany, where pent-up demand for stock is rife at the moment. Germany faces an interesting couple of weeks with big data releases this week and a potential national lockdown imminent. These are sure to weigh on the € near-term.
A key part of the Euro-Zone and €'s recovery this year depends on tourism, especially in the Mediterranean region. With no clear sign on what the UK will allow in terms of summer holidays as yet, the onus may be on the US to stimulate EU tourism. The New York Times have reported that the bloc will allow fully vaccinated Americans to visit the EU this summer. The EU halted non-essential travel more than a year ago and the tourism industry is in desperate need of customers, otherwise we may see once lively coastal spots lead to ghost-towns on the Med.
The data week belongs to the Euro-Zone & US with the UK offering virtually nothing of note. The EU especially have huge releases towards the end of the week that will create market volatility. £ will look to stay above the 1.15 mid-market level this week with £-$ pushing towards its 1.40 target once again.