The UK CBI retail sales index retreated sharply to 8 for December from 39 the previous month and below consensus forecasts of 24. Sales are expected to be poor for the time of the year in January with confidence inevitably undermined by concerns surrounding Omicron. Overall stock levels were comfortable, but there were also concerns that Omicron would cause further disruption to supply chains. The data maintained reservations surrounding the outlook for consumer spending, especially with devolved governments imposing fresh restrictions which will dampen activity in the leisure sector. Irish Prime Minister Martin stated that talks between the UK and EU on the Northern Ireland protocol were on track for progress which could underpin sentiment. Prime Minister Johnson shied away from further coronavirus restrictions in England ahead of the Christmas holiday, but there were strong expectations of further action soon after and Scotland announced a further tightening from December 27th.
Key Data
7.00 Gross Domestic Product (QoQ) (Q3) Act. 1.1% Exp. 1.3% Prev. 1.3%
German consumer confidence dipped sharply to -6.8 for January from -1.8 in December and well below consensus forecasts of -2.7. There was choppy trading ahead of the New York open with the Euro unable to hold against the US dollar. There was a stronger tone surrounding risk appetite which curbed the potential for further Euro short covering and carry trades funded through the single currency. The Euro was also undermined by concerns over the impact of very high energy prices with a further increase in gas prices during the day which will have a negative economic impact. German Chancellor Scholz stated that there is an urgent need for de-escalation on the Ukraine border with the Euro hampered by underling tensions. ECB council member Kazimir stated that there is a risk that elevated inflation will stay for a longer time. He added that the bank would need to act if the inflation outlook changes for the next three years. Euro-zone consumer confidence retreated to -8.3 for December from -6.8 previously and the weakest reading since April 2021.
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The Philadelphia Fed non-manufacturing index declined to 28.3 for December from 46.1 previously with robust readings for new orders and business activity. Employment indicators remained strong while inflation pressures eased slightly as markets continued to monitor supply-side issues. There were further fluctuations in risk appetite on Wednesday with near-term fears over a surge in Omicron cases offset by longer-term hopes over vaccine developments with Astra Zeneca announcing that it will produce an updated vaccine which will target the Omicron variant.
Key Data
7.00 Gross Domestic Product Annualised (Q3) Exp. 2.1% Prev. 2.1%