Eurozone Consumers Continue to Spend (page 2 of 2)

With retail sales deteriorating, we expect further weakness in the Swiss Franc which dovetails with our Technical Analyst's call for a plunge in CHF/JPY.

British Pound: April Rate Cut Will be a Close Call

It has been a volatile week for the British pound with dovish Bank of England minutes and weak employment numbers offset by a much stronger than expected retail sales report. April's rate cut by the BoE will be a particularly tough call. Following the minutes and employment numbers, the expectation for a 25bp rate cut next month increased significantly, but the retail sales numbers definitely came from left field. Therefore next week's current account, house price and CBI distributive trades report will be particularly important in determining whether the retail sales number was simply a fluke or representative of a broader recovery in the UK economy.

Carry Trades Rebound But Don't Count On a Broad Recovery

With the stock market closed for Easter, carry trades have extended their rise. If another shoe does not drop next week, we could see a further rebound, but a rebound does not make a recovery. We continue to stress that the current market environment makes it very difficult for carry trades to recover. It is also the fiscal year end for Japan, which means that repatriation could keep the yen under pressure. Meanwhile there are a lot of Japanese economic data due for release next week and we expect most of them to be Yen positive.

Canadian, Australian and New Zealand Dollars Continue to Slide Amid Lower

The Canadian, Australian and New Zealand dollars recovered slightly from their steep decline yesterday. Next week's data releases imply continued volatility in the commodity currencies, as Canadian retail sales figures are projected to be higher in light of 33 year low unemployment figures and wholesale sales rising at the fastest pace in 13 months. In the backdrop of a suffering economy, consumers continue to be the pillar of confidence, as projections imply continued spending in the coming months. Down under the New Zealand trade balance forecasts remain positive, boosted by the surging prices in dairy export, but with the recent declines in commodity prices, it remains to be seen if the economy will still continue to show a trade surplus. Although New Zealand GDP forecasts imply growth in the economy, the country's finance minister fears the possibility of a short lived recession, as consumer confidence dips to a 19 month low.