British consumers are not splashing the cash.Retail sales fell by 1.2% in May 2017, more than expected. Year over year, the rise is a very modest 0.9%. Excluding fuel, the drop is even bigger: -1.6% m/m and rising only 0.6% y/y. There are some minor upwards revisions, but these do not compensate for the disappointing headline numbers.
The deeper fall in core inflation shows that Brits continue cutting on non-essentials as prices of fuel and food remain high. Necessities trump less-important things.
GBP/USD was already sliding ahead of the publication. Yet another case of an early indication seen by or given to any market participants?
The pair is struggling with support at 1.27.
The UK was expected to report a drop of 0.8% in retail sales m/m in May after a surprising leap of 2.3% in April. Year over year, a rise of 1.7% was on the cards after 4% beforehand. Excluding fuel, a fall of 0.8% m/m and a rise of 1.9% y/y were on the cards.
The rise in the volume of sales in April came after long months of disappointments. The bigger picture is that the fall of the pound is pushing prices higher and these price hikes deter British consumers. Deeper surveys have shown a focus on essentials such as food and energy, against less consumption of non-essentials.
GBP/USD was trading on the lower ground ahead of the publication, around 1.2725. Support waits at the round number of 1.27, followed by 1.2615. Resistance is at 1.2770 and 1.2825.
The recent fall of the pair is mostly driven by the dollar. The Fed raised interest rates and shrugged off inflation on “one-off” factors. They are still expected to raise interest rates once again this year.
The big event coming up today in the UK is the rate decision of the Bank of England. The BOE is predicted to leave the interest rate unchanged at 0.25% and one member, Forbes, probably dissented once again.
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