hursday’s meeting accounts from the ECB were slightly on the dovish side. The ECB claimed that easy financial conditions “could not be taken for granted”, while showing rate setters were fully aware of the risk posed by the recent appreciation in the Euro that has seen the currency strengthen by over ten percent since the beginning of the year. Yesterday’s announcement provided little support for the common currency which temporarily traded at its lowest level since the end of July, albeit recovering during afternoon trading.

Earlier in the session, the latest inflation data from Eurostat suggested that the ECB may have genuine discussions about winding down its large scale stimulus programme when it next meets in September. Headline consumer prices increased by 1.3% in the year to July, a modest upward revision on the preliminary estimate. Core inflation remained unchanged, also at 1.3%, although we continue to think we’d need to see a more sustained rebound in the data before we get any firm indication that a tapering in the quantitative easing programme is on the way.

UK retail sales slow but steady in July

Sterling ended little changed against its peers yesterday with investors cautious to commit to positions either way following Thursday’s retail sales data. Sales came in broadly in line with expectations in July, showing that demand among UK consumers slowed last month. The headline measure slowed to just 1.3%, while excluding fuel came in at just 1.5% versus the 2.8% recording in June. While slightly underwhelming, demand remains resilient in the UK despite the sharp rise in consumer prices ensuring that real wage growth is now negative in Britain.

With no economic data releases at all in the UK today, the Pound will likely be driven by events elsewhere, absent political developments.

US Dollar recovers after Trump jitters

The Dollar itself recovered well against its major peers on Thursday, despite events a day previous that culminated in Donald Trump disbanding his two business councils as a response to violence in Charlottesville. It is clear that the Trump administration is losing support from business leaders and recent domestic divisions are undoubtedly getting in the way of plans to implement fiscal stimulus in the US.

Economic data out yesterday was actually, on the whole, disappointing. Industrial production was particularly soft, increasing by just 0.2% in July versus the 0.3% consensus. FOMC member Kaplan will be speaking in the US again this afternoon, although is not expected to add anything that could shift the markets. Other than that today bodes to be a relatively subdued end to the week in the US.