DailyFX

FX Headlines: SNB Rate Decision, UK Sales to Stoke Post-FOMC Moves

Christopher Vecchio

Talking Points

- SNB Rate Decision expected to go off without a hitch.

- Will higher rates hurt UK consumption just like in US?

- UK policymakers unlikely to address higher rates with QE per the September Minutes.

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EURO-ZONE ECONOMIC CALENDAR

There is no data on the Euro economic calendar for Thursday, September 19.

See the Euro economic calendar for the week of September 15 to 20.

Read more: Euro Lifted by Best ZEW Surveys Since 2009; Pound Struggles after CPI

UK ECONOMIC CALENDAR

FX_Headlines_SNB_Rate_Decision_UK_Retail_Sales_to_Stoke_Post_FOMC_Moves_body_Picture_1.png, FX Headlines: SNB Rate Decision, UK Sales to Stoke Post-FOMC Moves
FX_Headlines_SNB_Rate_Decision_UK_Retail_Sales_to_Stoke_Post_FOMC_Moves_body_Picture_1.png, FX Headlines: SNB Rate Decision, UK Sales to Stoke Post-FOMC Moves

UK Retail Sales data for August will stoke further volatility in the British Pound on Thursday, and it appears that estimates may be too tepid, leading to an opportunity to look for additional strength in the best performing major over the past six months.

Of note, the UK PMI Services index saw a +0.53 rolling 12-month correlation with yearly Retail Sales figures amid the July set of data. This trend has strengthened in 2013, as the 12-month rolling correlation was +0.03 in January. Accordingly, should Retail Sales follow the index’s surge to 60.5, seeing a retail sales figure above +3.5% wouldn’t be a surprise.

The downside risk here is that higher UK interest rates may have started to shift consumer preferences; and with wage growth low, the opportunity cost of paying higher funding costs (auto loans, home mortgage, etc.) necessarily translates into reduced consumption elsewhere (unless debt levels rise). We have seen this happen in the US in August; a soft consumption print out of the UK will stall any GBP momentum.

Read more: GBP/USD Rallies to Fresh Highs as BoE Votes 9-0 against More QE

SWISS ECONOMIC CALENDAR

FX_Headlines_SNB_Rate_Decision_UK_Retail_Sales_to_Stoke_Post_FOMC_Moves_body_x0000_i1028.png, FX Headlines: SNB Rate Decision, UK Sales to Stoke Post-FOMC Moves
FX_Headlines_SNB_Rate_Decision_UK_Retail_Sales_to_Stoke_Post_FOMC_Moves_body_x0000_i1028.png, FX Headlines: SNB Rate Decision, UK Sales to Stoke Post-FOMC Moves

Programming note: Currency Strategist Ilya Spivak will be covering the Swiss National Bank Rate Decision live starting at 03:15 EDT/07:15 GMT in the DailyFX Live Trading Room.

Read more: Gold Posts Largest Drop Since June Ahead of Fed – Bearish Below $1373

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--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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