Morning Commentary: Brick and Mortar vs. Online Shopping

Foreign Exchange - Morning Commentary
Brick and Mortar vs. Online Shopping
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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
For those of you who do not yet know, I will be retiring from CNB on January 3rd after 19 years of service. I know many of you will be off over the next two weeks as I will, and I wanted to say a proper goodbye before I leave the bank.

I want to thank all the CNB colleagues and clients for their feedback and dialogue regarding the morning commentary and any other subjects under the sun that we have discussed via email, phone, hallways or kitchen galley. Your friendship has made for a great 19 years, and I will have a large void to fill to replace the positive feedback and enjoyment that I have received by our exchanges. Happy Holidays and a great 2020 to all!

It’s that time of year for us to do our holiday shopping for family and friends. An interesting nod to e-commerce is that as consumers, we are spending as much money remotely and online as we are in person. A new report from the Federal Reserve cites the latest available date from 2018 and shows that online and in-person purchases were almost equal last year. With a rising trend solidly in place favoring online shopping, 2019 will probably be the first year that online purchases surpass in-person card purchases.

The value of card payments done remotely has jumped nearly four-fold more than in-person card transactions since 2012. The number of in-person transactions has dropped from 84% of all transactions in 2012 to 72% in 2018 which explains why so many brick and mortar stores suffered financially and were slow to react to the change in consumers’ buying habits. Brick and mortar store spending is waning, but both online and brick and mortar  stores will have to continually adjust to consumers ever-changing spending habits and the need for quick and responsive delivery times to survive going forward.

Markets are entering holiday mode with thinning volumes and reduced transactions flows. Equities remain better bid and continue on their torrid run since September. The main feature of the currency markets today is EUR/GBP. The British pound remains supported near the key $1.3000 level and the euro, European currencies and Eastern bloc currencies are under pressure in thin markets. There is no real economic data to cause the move other than book-squaring and end of the year adjustments.
  • The U.K. reported final Q3 GDP data and it improved a tick from 0.3% to 0.4% bringing YoY growth to 1.1%. Upward revisions in investment and net exports more than offset downward revisions to private consumption and government spending. Andrew Bailey was chosen to succeed Mark Carney as the next head of the Bank of England. He is seen as a safe and uncontroversial choice and comes from a strong regulatory background which will be valuable in the next stage of separation from the EU.
  • The Canadian dollar is the weakest of the majors this morning on the back of weak retail sales for October. Retail sales fell 1.2% against expectations of a gain of 0.5%; ex-autos also saw a decline of 0.5%. Canadian interest rates are down on the session as is the Canadian dollar.
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