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Retail sales in the United Kingdom for September showed a year-on-year increase of 1.5%, surpassing expectations of 0.6%. This growth was recorded amidst various economic activities and market events globally.
Elsewhere in Europe, the Eurozone’s HCOB Composite Purchasing Managers’ Index expanded to 52.2 in October. Meanwhile, in the United States, the CPI data for September is anticipated to reveal inflation at its highest in sixteen months.
Commodity Prices And Currency Movements
In commodities, West Texas Intermediate (WTI) oil steadied above $61.00 as oversupply worries diminished. The GBP/USD pair gained traction following positive UK retail sales data.
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We are seeing strong UK retail sales data for September, but the Pound is not gaining strength. This suggests the market is more concerned with the Bank of England’s future interest rate cuts, especially after the aggressive rate-hiking cycle we saw end back in 2024. Traders should be cautious of buying into Sterling strength, as any rally might be short-lived and present a selling opportunity for GBP futures.
Global Economic Developments
The Eurozone’s surprise PMI expansion to 52.2, a level of growth not consistently seen in over a year, presents a clear contrast. This positive data could delay expected rate cuts from the European Central Bank, creating a divergence with the UK’s economic outlook. We might consider strategies that favour the Euro over the Pound, such as long EUR/GBP spot positions or call options.
In the United States, all eyes are on the upcoming September CPI report, which is expected to show high inflation once again. The market remembers the stubborn inflation of 2023, so a hot print will likely boost the US Dollar and could pressure stock indices as it raises the odds of a hawkish Federal Reserve. The confirmed Trump-Xi meeting adds complexity, making this a prime environment for volatility plays, such as straddles on the Dow Jones index ahead of the data release.
WTI oil stabilizing above $61.00 is significant, especially when we recall prices were frequently above $80 just a couple of years ago. Easing concerns about oversupply, combined with better economic signals from Europe, suggest demand may be forming a floor under the price. This could be a good entry point for traders to consider buying long-dated call options, anticipating a gradual recovery in energy prices through the end of the year.
