- UK retail sales carry negative expectations for March after falls in February.
- UK data has been mixed so far this week.
- Concerns about Brexit weigh on GBP/USD.
The UK publishes its Retail Sales report for March on Thursday, April 18th, at 8:30 GMT. Back in February, headline sales advanced by 0.4% MoM. Excluding fuel, consumption rose by a more modest 0.2%. These are moderate changes in comparison to higher volatility beforehand.
Moderate changes are on the cards this time as well, but to the downside: a drop of 0.2% in headline sales, and 0.3% excluding fuel. Year over year, sales are forecast to accelerate to 4.6% after 4%, and ex-fuel to move up to 4% from 3.8%.
So far this week, inflation disappointed with 1.9% against 2% while the jobs report was upbeat. The unemployment rate remained at a low of 3.9% while wage growth remained robust at 3.5%. The final top-tier report for the week can, therefore, serve as a tie-breaker, to an even 1:1 score. However, the score is not exactly balanced.
GBP/USD reaction – downside bias
On one hand, the low expectations leave more room for an upside surprise, opening the door to gains for GBP/USD.
On the other hand, the pound is on the back foot due to stalled Brexit talks. The government and the opposition have not reached any breakthrough on the path forward regarding Brexit. Labour leader Jeremy Corbyn’s words that “there is no agreement on the customs union” weighed on the pound.
Unless there is a breakthrough, the bias remains bearish.
So, in case of sales meeting expectations and drop at a moderate scale, there is more room to the downside than the upside. In case of a worse deterioration in consumers’ behavior, the pair could fall at a faster clip.
It would take a substantial upside surprise to trigger a rise, especially a sustainable one.
Retail sales probably slightly dropped in March after a small rise in February. The bias is against GBP/USD due to Brexit after balanced data beforehand.