GBP/USD Dips as Retail Sales Slide

The markets were expecting a letdown from December retail sales after a strong November reading, but nobody was expecting a multi-year drop. Yet that’s what happened, as retail sales plunged 3.2% m/m, the lowest level since January 2021. Considering the sharp drop, the British pound’s reaction has been muted.

Canadian Dollar Drifting Ahead of Retail Sales

Canada releases retail sales for November later today, and the markets are expecting no growth, following a 0.7% gain in October. Retailers tried to entice shoppers with discounts in November such as Black Friday, but unless there is a huge surprise from today’s retail sales, shoppers held the purse strings tight in November.

Yen Under Pressure, Core CPI Eases

The Japanese yen has recovered after losing ground earlier in the day. USD/JPY rose as high as 148.80, its highest level in three weeks. The yen has rebounded and is trading in Europe at 148.10, down 0.03%. It has been a rough week for the yen which has fallen 2.1% and is moving closer to the key 150 level.

Canada: November Retail Sales Surprise to the Downside, But Expect a Rebound in December

Retail sales declined by 0.2% month-on-month (m/m) in November, coming in weaker than Statistics Canada's advance estimate for a flat reading. October's print was revised slightly to +0.5% m/m from +0.7% m/m.

Week Ahead – ECB and BoJ Meetings in the Spotlight

In the euro area, the European Central Bank decision will take center stage on Thursday. Market pricing suggests the central bank will do nothing, so the action will come mostly from the commentary by President Lagarde. 

UK PMIs to Reveal How the British Economy Entered the New Year

After the hotter than expected UK CPI data for December, investors scaled back their Bank of England rate cut bets, lowering the total basis points worth of reductions expected by the end of the year to 115 from 125 and the probability of the first quarter-point reduction to be delivered in May to 55% from around 90%.

Weekly Economic & Financial Commentary: Consumers Just Keep Humming

As market participants continue to digest last week's slightly hotter-than-expected consumer price data, activity data released this week show underlying demand was still humming along in the final stretch of 2023. Retail sales surprised to the upside and industrial production rose in December.

The Weekly Bottom Line: A Resilient Consumer Dims Hopes for an Early Rate Cut

Just when you think the U.S. consumer might yield to mounting pressures currently buffeting their balance sheets, they surprise by closing out 2023 on a retail spending binge. The increased spending kept the economy on firm ground and suggests a solid hand off heading into the new year. It also caused investors to pare back expectations for a March rate cut and pushed U.S. Treasury yields higher.

We Expect BoJ to Stay on Hold

Early Tuesday we await the rate decision from the first policy meeting from Bank of Japan in 2024. We expect the Bank of Japan to stay on hold. Wage growth remains the key missing piece of the puzzle before they can raise the policy rate out of negative and let go of the yield curve. We expect they will be ready to do that once we have hard evidence that the Shunto (spring wage negotiations) results in wage acceleration.

Busy Week Ahead: Tech Earnings and Central Bank Meetings

The week’s economic calendar is also busy with major central bank meetings including the Bank of Japan (BoJ), the European Central Bank (ECB) and the Bank of Canada (BoC).