British Retail Sales is the primary gauge of consumer spending and is one of the most important economic releases. A reading that is higher than the market forecast is bullish for the British pound.
Update: UK retail sales drop 1.5% – more than expected
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Friday at 9:30 GMT.
Indicator Background
An increase in retail sales numbers signifies stronger consumer spending, which is a key component of economic activity.
Retail Sales looked sharp in December, jumping 2.6%. This easily beat the estimate of 0.5%. The markets are bracing for a sharp downturn in the upcoming release, with the estimate standing at -0.9%. Will the indicator surprise the markets again with a strong performance?
Sentiments and levels
The pound was red-hot last week but has since given up some of those gains. UK releases such as PMIs have lost some ground and the BOE has said that there is still plenty of slack in the economy. The pound got a strong lift from an admission from the BOE that an interest rate hike is possible next year, but the pound may run into some turbulence if the economy slows down. In the US, the general direction of the economy is positive, but recent hiccups in employment releases are weighing on the dollar and could delay further QE tapers. So, the overall sentiment is neutral on GBP/USD towards this release.
Technical levels, from top to bottom: 1.7180, 1.6990, 1.6705, 1.66, 1.6475 and 1.6343.
5 Scenarios
- Within expectations:-1.1% to -0.9%: In such a case, the pound is likely to rise within range, with a small chance of breaking higher.
- Above expectations: -0.8% to -0.5%: An unexpected higher reading can send GBP/USD above one resistance line.
- Well above expectations: Above -0.5%: Such an outcome could propel the pair upwards, and a second resistance line might be broken as a result.
- Below expectations: -1.5% to -1.2%: A weak reading could push GBP/USD below one level of support.
- Well below expectations: Below -1.5%: A strong contraction in the reading could push the pound below a second support level.
For more about the pound, see the GBP to USD forecast.
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