The UK CBI retail sales index dipped to –10 for May from 5 the previous month and well below expectations of 10 with retailers expecting no change next month. There was little overall impact with markets still expecting that a decline in energy prices will help cushion the economy over the next few months. Overall risk appetite was more fragile as UK equities moved lower which curbed potential Sterling support. Bank of England MPC member Haskel stated that further interest rate hikes cannot be ruled out and he wants to lean against the risks of inflation momentum. UK retail sales volumes increased 0.5% for April and marginally stronger than expected which had little impact on Sterling.
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US initial jobless claims edged higher to 229,000 in the latest week from 225,000 previously, but well below consensus forecasts of 250,000. Continuing claims also declined slightly to 1.79mn from 1.80mn previously, maintaining expectations of a firm labour market. The first quarter GDP estimate was revised higher to 1.3% from the flash reading of 1.1% with a slightly higher estimate for consumer spending. The PCE prices index was also revised slightly higher to 5.0% from 4.9%. Pending home sales were unchanged for April after a 5.2% decline the previous month and slightly below market expectations. The Chicago Fed National activity index strengthened to 0.07 for April from –0.37 the previous month and slightly stronger than expected.
Key Data
13.30 Durable Goods Orders (Apr) Exp. -1% Prev. 3.2%
13.30 Nondefence Capital Goods Orders ex Aircraft (Apr) Exp. -0.2% Prev. -0.6%
Fed Governor Waller stated that the decision whether or not to raise rates in June will depend on the data releases over the next three weeks. He added that prudent risk management may suggest skipping a June move and lean towards a July hike depending on inflation data and whether credit conditions have tightened excessively. He added that he does not expect that the data in the next couple of months to make it clear that the terminal interest rate has been reached. He also noted that he did not backing stopping rate hikes unless there is clear evidence that inflation is moving down to the 2% target. According to minutes from May’s policy meeting, several members stated that further policy firming may not be needed if the economy evolves in line with their expectations. Some participants, however, considered that additional firming would likely be warranted.
Key Data
13.30 Gross Domestic Product Annualised (Q1) Exp. 1.1% Prev. 1.1%