GBP/USD: Trading the British Retail Sales Feb 2016

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British Retail Sales is considered one of the most important economic indicators. A reading that is higher than the market forecast is bullish for the British pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Friday at 9:30 GMT.

 Indicator Background

Retail Sales is the primary gauge of consumer spending, a critical component of economic growth. Traders should treat this indicator as a market-mover.

Retail Sales backtracked in December, with a loss of -1.0%, well below the estimate of -0.1%. This marked the indicator’s sharpest decline in almost two years. The markets are expecting an upturn in the January report, with an estimate of 0.8%.

Sentiments and levels

Recent numbers out of the US and the UK have been lukewarm, with both economies hurting from weak inflation levels which show no sign of improving. With a March rate hike likely off the table, monetary divergence is having minimal impact. So, the overall sentiment is neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.4635, 1.4562, 1.4346, 1.4227, 1.4135 and 1.4000.

5 Scenarios

  1. Within expectations: 0.5% to 1.1%: In such a case, the pound is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 1.2% to 1.6%: A strong reading could send GBP/USD above one resistance line.
  3. Well above expectations: Above 1.6%: Such an outcome would likely propel the pair upwards, and a second resistance line might be broken as a result.
  4. Below expectations: 0.0% to 0.4%: A weak reading could push GBP/USD below one level of support.
  5. Well below expectations: Below 0.0%: A contraction in retail sales could push the pound lower and break a second support level.

For more on the pound, see the GBP/USD forecast

Get the 5 most predictable currency pairs

About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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