NEWS / Foreign Exchange

UK Retail Sales Blow Out Expectations; Talk of Rate Hike Back on Table

- The European indices are trading sharply higher. European indices had a strong open, rallying after the FOMC indicated that it is no longer inclined towards a possible interest rate hike.

- European government bonds are trading higher in the session, but are currently off of their best levels. Over in the UK gilts dropped sharply upon the release of stronger than expected retail sales data for the month of February, and currently sit in negative territory.

- The German Finance Minister said overnight that a further rise in the Euro may pose a risk to exports. Stienbrueck said that, thus far, the outlook for exports remains good, and noted that the impact of the equity market decline on the global economy is unclear.

- In a draft report released overnight the EU said that further ECB rate hikes could threaten growth. The EU sees a risk of wage growth outstripping productivity growth, as well as higher than expected oil prices. The EU said that growth remains robust in the Euro-Area, and sees growth accelerating during the second quarter.

- Retail sales blew out expectations in the UK rising to 1.4% m/m in February, a 13-month high, and 4.9% y/y, a 26-month high, with upward revisions to January??™s figures. Retail sales were led higher by growth in clothing and footwear sales, as well as other non-food store sales.  The stronger than expected retail sales data suggests that January??™s data may have been a blip, bringing talk of a possible rate hike in the near future back into play. For the 3-month period from December through February retail sales grew by 1.1% against the previously three months, and 4.1% compared to the same period last year.

- On the energy front, front month crude oil futures are currently trading higher in the session. In energy news, the OPEC research chief said overnight that he expects oil prices to remain within the $50 to $60 range within the coming years. OPEC also noted that it is watching the US economy. Later in the session another OPEC official said that an oil price of $70/barrel would be unreasonable, and may trigger OPEC action.