US retail sales rose by more than expected in October, largely due to a resurgent car market figures showed yesterday. Sales rose 1.4%, rebounding strongly after September's 1.5% fall. Both months' figures were dominated by the impact of car sales. Taking out car sales, overall retail sales rose by just 0.2% in October, underlining the fragile nature of the economic recovery.
Consumer spending makes up 70% of GDP, which is the broad measure of U.S. economic activity. The retail sales data are an important indicator of consumer spending and if it shows that the figures are slowly starting to rise investors will start to move towards riskier assets and away from the relative safe-haven of the greenback.
sterling weakened on the back of the better than expected U.S. retail sales at first but then FED chairman Bernanke had a speech during afternoons trading stating that U.S. interest rates are likely to remain low for "an extended period," which lead investors to eventually conclude that Fed monetary policy will remain loose for a long time helping sterling gain to nearly a three month high against the Dollar.
What with sterling gaining against the USD and Euro yesterday all eyes will be on the BoE minutes which will be released on Wednesday to see if there are any clues to whether there could be more quantitative easing. If there were more votes to extend more vigorously we could see the gains of yesterday eradicated very quickly so stay in contact with your account manager so we can keep you updated with every data release throughout the course of the day.
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