UK Retail Sales Might get a Royal Boost

Sterling could extend gains on an April retail sales boost from Will & Kate, ECB on collision course with EU politicians, Japan falls into recession

After the battering the pound took yesterday from disappointing unemployment figures, and slightly dovish MPC minutes we could see a brief respite today, if as expected UK April retail sales improve from Marchs disappointing 0.2%.

Expectations are for a rise of 0.8%, as a result of a tourism and travel boost from the extended Easter break, as well as the Royal Wedding. The extended period of warm weather could also have brought forward purchases of summer clothing.

Nationwide consumer confidence data overnight has certainly not done it any favours though, slipping back slightly from the previous months 46 to come in at 43.

EURGBP resistance sits at 0.8870 after yesterdays break above 0.8780, while GBPUSD looks set to test 1.6060 while below 1.6300.

The single currency gained the most at the pounds expense yesterday on the back of some hawkish comments from Lorenzo Bini-Smaghi who insisted that monetary policy could not be tailored to suit the needs of the weakest economies, while going on to oppose any type of restructuring of Greek debt, putting him and the ECB on a collision course with EU politicians who are said to be mulling the possibility of some form of soft restructuring. Certainly Greece remains the wild card with respect to the Euro and will continue to weigh on sentiment. EURUSD resistance remains around 1.4290, the 55 day MA, but a break higher could see a run up to 1.4380.

Yesterdays FOMC minutes were pretty much a non-event with policy makers discussing how to go about normalising monetary policy post QE2, with a number of Fed members concerned about possible inflation risks. Most members felt that rate policy was the best way to achieve an exit, followed by selling off assets.

See the TRADING IMPLICATIONS from the FOMC minutes on EURUSD, GOLD, US CRUDE & CADJPY here: http://ashraflaidi.com/products/sub01/access/?a=429

US weekly jobless claims later today are set to remain stubbornly above the 400k mark, coming in at 420k, only slightly down from last weeks 430k.

Japanese first release of Q1 GDP figures not surprisingly marked the return of recession to the Japanese economy. Expectations had been for a decline of 0.5% with an annualised figure of -1.8%. In any event the figure was worse then expected coming in at -0.9%, with an annualised rate of -3.7%.

Industrial production data for March was also very disappointing, falling 15.5%, though given the quake hit in March, that shouldnt really have been a surprise either.

What it does mean is that the Bank of Japan will continue to keep fiscal policy as loose as possible bearing out BoJ governor Shirakawas comments yesterday about the severe state of the Japanese economy.

By KM - AshrafLaidi.com staff