Euro Falls Sharply After ECB Statement, USD Higher On Retail Sales

Market Reviews

The euro fell sharply after the ECB decided to leave the policy unchanged, but made several important statements. The British pound grew on strong UK retail sales, with the GBP/USD pair testing the 5-day highs near $1.3450. The US dollar is boosted by retail sales data and solid jobless claims report.

The European Central Bank left interest rates without changes and signalized that there won’t be any rate hikes until the summer of 2019. The main refinancing rate, which determines the cost of credit in the economy, remained unchanged at 0.00%, while the rate on the marginal lending facility (the emergency overnight borrowing rate for banks) stayed at 0.25%. The ECB said it anticipates that its asset purchase program will end in December after halving to €15 billion per month from September 2018, from €30 billion at present.

ECB now projects annual Eurozone GDP growth to be at 2.1% in 2018, down from March projection of 2.4%. For 2019 and 2020, GDP projections were kept unchanged at 1.9% and 1.7% respectively. HICP inflation is projected to be 1.7% in 2018, 2019 and 2020. That’s notably revised up from March projection of 1.4% in 2018, 1.4% in 2019 and 1.7% in 2020.

The UK Office for National Statistics (ONS) reported, that retail sales include fuel grew by 1.3% mom in May versus expectation of 0.5% mom. Retail sales include fuel rose 3.9% yoy versus expectation of 2.4% yoy. Retail sales ex-fuel increased 1.3% mom versus expectation of 0.3% mom and prior 1.4% mom. Retail sales ex-fuel rose 4.4% yoy versus expectation of 2.5% yoy and prior 1.4% yoy.

The US economic data showed, that initial jobless claims fell by 4k to 28k in the week ended June 9, slightly better than expectation of 223k. Continuing claims declined by 49k to 1.697m in the week ended June 2 (the lowest level since December 1, 1973). Headline retail sales grew by 0.8% in May versus expectation of 0.4% mom. Ex-auto sales increased by 0.9% versus expectation of 0.3%. Import price rose 0.6% mom in May versus expectation of 0.5% mom. New housing price index rose 0.0% mom in April versus expectation of 0.2% mom.