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Euro slides on ECB currency concerns - as it happened

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The European Central Bank fears the euro may be “overshooting”, posing a threat to crucial exports

 Updated 
Thu 17 Aug 2017 08.44 EDTFirst published on Thu 17 Aug 2017 02.58 EDT
The euro logo in front of the European Central Bank in Frankfurt.
The euro logo in front of the European Central Bank in Frankfurt. Photograph: Daniel Roland/AFP/Getty Images
The euro logo in front of the European Central Bank in Frankfurt. Photograph: Daniel Roland/AFP/Getty Images

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Summary

That’s it for the day and the big news came from the European Central Bank minutes and UK retail sales.

ECB minutes revealed that the Bank’s policymakers are fretting about the euro “overshooting” against other currencies. That’s a concern because a strong euro would make exports from the 19-nation single currency bloc less competitive. The release of the minutes sent the euro on a downward trajectory.

In the UK, retail sales were up 0.3% month on month in July, slightly ahead of a forecast of 0.2%, an encouraging sign coming hot on the heels of an apparent easing of the cost of living squeeze. However June’s retail sales figure was revised downwards from 0.6% to 0.3%.

Elsewhere, European markets took a turn for the worse after a winning streak and the FTSE was down by mid-afternoon, after lacklustre results from B&Q owner Kingfisher and Mecca Bingo owner Rank.

On that note, it’s time to put the blog back into hibernation. Thanks for all your comments, and we’ll be back bright and early tomorrow with all the latest developments.

In a note snappily titled “Eurozone: Between taper and tantrum”, analysts at Dutch bank ING have been unpicking those ECB minutes, which have put the euro on the slide.

They are looking ahead to next week’s meeting of central bankers at Jackson Hole and think the minutes reflect cautiousness at the ECB about unwinding monetary stimulus.

Today’s minutes fit into the picture of an ECB which wants to steer and moderate the process towards tapering extremely cautiously. Yesterday’s reports that Mario Draghi would possibly not say anything new on the bank’s monetary policy at his speech at the Jackson Hole conference on 25 August had already given the same flavour.

However, ING reckon this does not rule out the possibility of more subtle changes of tone at the ECB, most likely further towards the back end of the year.

All of this means that in our view the ECB will take another baby step towards tapering at the September meeting.

This could be done by putting more emphasis on the strong economic recovery which easily could do with somewhat less monetary stimulus and/or by using the well-known key phrase that the Governing Council has tasked the relevant committees to investigate several options for QE in 2018.

Tapering will come but somehow the ECB itself does not yet entirely know when and how to do it.

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UK retail sales growth may have been pretty lacklustre in July but nobody has told Asda. The British supermarket, part of the world’s largest retailer Wal-Mart, has reported its first underlying sales growth for three years.

Like-for-like sales at the UK’s third biggest supermarket rose by 1.8% in its second quarter, helped by food price inflation and a comparison against a weak period last year.

That’s still quite the turnaround from the first quarter, when sales were down 2.8%, the eleventh straight quarterly decline.

Euro slips as ECB minutes are released

Details of the European Central Bank’s Governing Council meeting for July have been released.

It seems policymakers are concerned about the euro “overshooting” in the future. In other words they’re worried the euro may strengthen too much.

The reason that’s a concern is that the eurozone relies quite heavily on exports and a stronger euro could make those exports less attractive to buyers outside the 19-nation bloc.

The euro hit a three-week low against the dollar after the ECB voiced its fears.

The euro has stumbled after ECB voices concerns over the strengthening exchange rate https://t.co/WEGeQ0YIEd pic.twitter.com/l2Sx1AvEZy

— fastFT (@fastFT) August 17, 2017
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The Federation of Small Businesses has taken a look at July’s UK retail sales and they are not impressed. Here’s the verdict of Mike Cherry, the FSB’s national chairman.

Confidence among small retailers has plummeted over the first half of the year. We’re worryingly close to flat, or even negative, retail sales growth across the UK.

“With operating costs at their highest in four years, small business owners are paying themselves less, struggling to award pay rises and pushing up prices in an attempt to absorb increased outgoings. This threatens to further stifle already reduced consumer spending power.

“Inflationary pressure, Brexit uncertainty and delays to business rates relief measures are making it almost impossible for small retailers to invest and plan for the future. In this unforgiving climate, the Government needs to carefully consider its inaugural Budget. Stealth tax grabs in the form of hikes to fuel duty and insurance premium tax will make a bad situation worse.

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A quick check on markets, currencies and commodities as we head towards noon.

  • The FTSE100 is down 25 at 7407 after disappointing numbers from Kingfisher and Rank
  • Germany’s DAX is 12 points lower at 122251, while the French CAC is off 8.6 points at 5168
  • Sterling is at $1.2858 and €1.1694
  • Brent crude oil is flat at $50.24 per barrel

Time for a bit of light relief after those chewy retail sales figures.

Harper’s has published a transcript of the jury selection process in the trial of beleaguered pharmaceuticals chief executive Martin Shkreli, who was convicted of fraud earlier this month.

It’s fair to say that potential jurors were tough to find, with most already having formed some pretty strong opinions on Shkreli, who has been widely condemned after his company Turing raised the price of drugs for conditions including HIV/AIDS. More than two hundred were excused as a result.

Former drug company executive Martin Shkreli exits U.S. District Court after being convicted of securities fraud in the Brooklyn borough of New York City, U.S., August 4, 2017. Photograph: Carlo Allegri/Reuters

It started badly, with prospective Juror No 1 declaring: “I’m aware of the defendant and I hate him.”

Another candidate described Shkreli as the “most hated man in America” while one felt incapable of being impartial because he “kind of looks like a d***”.

But perhaps the most heinous accusation levelled at Shkreli by jurors was that he “disrespected the Wu-Tang Clan”, the influential New York hip-hop group that enjoyed a meteoric rise in the 1990s with their distinctive sound.

The Wu Tang Clan, rappers, hip hop group

Shkreli was the man who bought the sole copy of the Wu-Tang’s special release “Once Upon A Time in Shaolin” for $2m in 2015, on the condition that he didn’t release it for 88 years.

Shkreli duly leaked it to celebrate Donald Trump’s election, sparking a war of words with the group’s members including Ghostface Killah, who deemed him a “sh*thead”.

Of course, any fan of the hip-hop outfit could have told Shkreli that the Wu-Tang Clan Ain’t Nuthing Ta F’ Wit and advised him to Protect Ya Neck, or risk crying Tearz.

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Eurozone inflation holds steady at 1.3%

Price rises in the 19 countries that share the euro currency held firm during July, with inflation sticking at 1.3% excluding energy and unprocessed food, according to the European statistics office Eurostat.

Inflation remains below the European Central Bank’s target of 2% but has ticked up slightly on 1.2% in June and came in above analysts’ forecasts of 1.2%.

We may get an indication later today of whether the ECB is moving towards an unwinding of its monetary stimulus programme, with the Bank’s Governing Council meeting minutes from July due to be published.

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Here’s some more detail on those lacklustre numbers from B&Q and Screwfix owner Kingfisher.

Analysts at AJ Bell have noted that despite Kingfisher being £368m of the way through a £600m share buyback, its stock has slumped to its lowest level since late 2014.

The failure of this largesse to support the shares raises further questions over whether buybacks are a good value of creating long-term value for investors or not.

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