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With most European politicians still sunning themselves by the Mediterranean the market has returned to basing its movements on the fundamental data that arises from the world economy and not the thoughts of some Cabinet minister. Unfortunately this data is as confused as I’ve seen it in my time in markets.

We wrote yesterday about the divergence in the official data from the UK economy; something that continued with the publication of the latest retail sales numbers that saw an increase of 0.3% against a fall of 0.1%. Most of this increase is as a result of increased fuel sales in the month of July with the ONS stating that little Olympic effect was seen. Given only 2 days of the games took place in July that is not unexpected and if there is an Olympic lift to happen then it will be seen in next month’s figures.

The fact that the rise came from fuel sales emphasises the problems on the traditional High St with industries such as the sport and leisurewear retailers falling to capitalise on Euro 2012 or Wimbledon.

The landscape for retail sales will continue to “bump along the bottom” through H2 as the pressure on wages from prices reduces the propensity to spend on anything but the bare essentials.

Sterling pushed back above 1.57 against the US dollar on the announcement and, for once, has managed to stay above there. Dollar weakness was seen after a poor Philly Fed number once again stoked the fires of further QE from the Federal Reserve.

The euro was bid heavily against all of its crosses following a think tank report that suggested that Mario Draghi and the rest of the ECB are ready to intervene in European peripheral debt should Spain ask for assistance. Spain has not yet asked for help as it is still attempting to negotiate a lack of “conditionality” i.e. further austerity measures to any new aid package.

An article in today’s Telegraph is getting a bit of notice as it says that “Finland is preparing for the break-up of the Eurozone”. While we see certain countries leaving the single currency in the next year or so, a complete break-up of the Eurozone is not envisaged.

Today’s data docket is relatively quiet with most people expecting the slow, gradual grind in risk to continue through the session.

Indicative Rates Sell Buy
GBPEUR 1.2696 1.2722
GBPUSD 1.5700 1.5529
EURUSD 1.2352 1.2377
GBPJPY 124.65 124.93
GBPAUD 1.5028 1.5053
GBPNZD 1.9425 1.9453
GBPCAD 1.5504 1.5533
NZDUSD 0.8074 0.8094
GBPZAR 12.95 13.00
USDZAR 8.2329 8.2748
GBPPLN 5.1521 5.1786
EURJPY 98.07 98.33

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