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Forex: GBP/USD jumps above 1.645 after stellar UK Retail Sales

on Jan 17, 2014
Updated: Oct 21, 2019
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**iNVEZZ.com, Friday 17 January:**

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UK Retail Sales surged by 2.6 percent m/m in December, comfortably beating the market consensus for an increase of half a percent and November’s marginal gain of 0.1 percent, which was revised down from 0.3 percent. Year-on-year the leading indicator of consumer spending jumped 5.3 percent last month, which is its fastest annual rise in nine years.

Easing inflation pressures along with an ongoing improvement in the UK labour market paved the way for the stellar retail sales print and the stronger-than-expected result invigorated buyers of Sterling, with the GBP/USD reaching 1.6458 in a matter of minutes after the release. The data raises the outlook for UK growth, given that household consumption expenditures account for about 65 percent of the country’s GDP.

However, analysts at Nomura are less convinced, and question the accuracy of the data and “fear a large unwind (or revision) in January”.
The UK Office for National Statistics notes that they “are reviewing the seasonal adjustments for the proportion of sales made online, a further update on progress will be provided next month”.

Markit chief economist Chris Williamson suspects “no-one is able to accurately measure online sales, let alone accurately seasonally adjusting [sic} them”. E-sales therefore may be the wild card from the report.
However, Williamson thinks the strong retail sales may be absolutely normal and just “a rebound from disappointment in October and November”.

Yesterday the GBP/USD found support around the 38.2 percent Fibonacci retracement of the uptrend from 1.5853 to 1.6593 at 1.6311 and today’s surge pushed cable above the 23.6 percent Fib at 1.6418. Although the RSI momentum indicator on the 4-hour chart surpassed its line of resistance today, the pound has not yet broken above its trend line (see chart above) which is acting as resistance. If sterling extends its run, the bears are likely to step up their game at or near 1.6484, which was the blowout top on the day of the QE tapering announcement. The pair may find at least short-term support near the 23.6 percent Fib at 1.6418.

The US economic calendar today offers the simultaneous release of December’s Building Permits and Housing Starts at 13.30 UTC, followed by the Preliminary University of Michigan Consumer Sentiment at 14.55 UTC.
Right now, the GBP/USD is trading around 1.6438, up 0.52 percent intraday.

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