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UK recession fears raised after Friday's retail sales shock

'PMI Wednesday' to set the tone for the week ahead..

£-$ has been very stable of late and is currently trading at the same levels as 5-weeks ago, even after the UK's horror retail sales data release. It was some miss on estimates with the MoM figure arriving at -3.2% in December, rather than the expected 1.3% (up from 0.5%). It was the largest decrease in the retail sales number since January 2021.

The soft reading shows consumers are struggling under the weight of high inflation and high interest rate levels. Whilst inflation is coming down, shop prices are still rising. Charts show that sales volumes have been trading steadily lower since inflation starting surging in 2021. Overall, 2023 saw sales volumes fall by 2.8%, the lowest level since 2018.

The Pound did drop after the release due to recession and stagflation fears, as-well-as considerations being brought forward as to when the BoE may start cutting interest rates (the markets main driver). But, Sterling remains buoyant for now and continues to be a favourable currency for 2024 so far.

The Euro-Zone finally sees some action this week in terms of data, after standing idly by the last 2-weeks. The PMI's will likely rule the week's volatility, but President Lagarde's speech after the ECB interest rate decision is a must watch. The decision is expected to be a non-event, but those involved in the market will be second-guessing what Lagarde says in regards to when interest rates will be cut. 

The Dollar continues to struggle against the Pound at the moment and has made no headway for 5-weeks now. For the third week in a row, the majority of analysts are predicting £-$ weakness and there is a chance this week with the US releasing more than one key release. 

A quiet start to the week suddenly bursts into life on Wednesday with the PMI's and then the US offers up GDP, jobs & PPI thereafter. The former is expected to arrive less than half of what it did the previous quarter (Q3's figure was huge and unexpected), on trend with Q1 & Q2. Friday's PPI report could also create volatility this week..

Expected mid-market ranges for January 22nd 2024

    $1.2600 - $1.2750    

    €1.1600 - €1.1700    
Upcoming Data
Monday 22nd January 2024

Tuesday 23rd January 2024
07:00 UK - Public sector net borrowing
15:00 EU - Euro-Zone consumer confidence

Wednesday 24th January 2024
08:15 EU - French PMI
08:30 EU - German PMI
09:00 EU - Euro-Zone PMI
09:30 UK - PMI
12:00 US - Mortgage applications

14:45 US - PMI

Thursday 25th January 2024
07:45 EU - French business climate
09:00 EU - German business climate
11:00 EU - French unemployment benefit claims
13:15 EU - ECB interest rate decision 
13:30 US - GDP, durable goods & initial/continuing jobless claims
13:45 EU - ECB press conference

15:00 US - New home sales

Friday 26th January 2024
00:00 UK - Consumer confidence
07:00 EU - German consumer confidence 
07:45 EU - French consumer confidence
08:00 EU - Spanish unemployment rate
13:30 US - PPI, personal income/spending