GBP/USD Takes Another Blow As UK Retail Sales Disappoint
Dailyfx | Aug 21, 2014 06:38AM ET
Talking Points:
- UK Retail Sales Ex Auto (YoY) (Jul): 3.4% Actual Vs 3.5% Estimated; 4.0% Prior.
- UK Retail Sales Inc. Auto (YoY) (Jul): 2.6% Actual Vs 3.1% Estimated; 3.6% Prior.
- GBP/USD Plunges More Than 20 Pips After UK Retail Sales Disappoint.
UK Retail Sales figure for the month of July crossed the wires at 2.6 percent year-on-year versus 3.6 percent in June. This exceedingly missed market expectations calling for a 3.1 percent change year-on-year. Moreover, UK Retail Sales Ex Auto came in at 3.4 percent in July compared to a print of 4 percent the prior month. This marginally came short of market forecast of 3.5 percent. All-in-all, it came in worst-than-expected and it may have been due to subdued wage growth paired with the ongoing slack in the real economy says DailyFX Currency Analyst David Song. Retail figures should be closely monitored by forex traders as it provides a gauge for consumer demand. This means higher retail output translates into stronger economic growth and could spark inflationary pressures.
Ahead of the data, the British pound grinded lower against the US dollar to trade below the psychologically significant 1.6600 level. This is on the backdrop of yesterday’s Bank of England (BoE) Minutes that revealed 2 of the 9 MPC members voted for a 25 basis point rate hike at the last meeting. Immediately after the data release, the GBP/USD plunged more than 20 pips to trade as low as 1.6568. This reaction may have been due to another dismal print that may add to later-than-expected rate hike speculation from the BoE. Sterling is working on its seventh consecutive weekly decline says DailyFX Currency Strategist Ilya Spivak.
The spotlight will be back on the US dollar as strings of mediocre economic releases from the US fill the session ahead. This includes August’s US Jobless Claims, Manufacturing PMI, July’s Existing Homes Sales data, and more which can be found on DailyFX Economic Calendar. For the remainder of the week, the much anticipated event comes from the start of Jackson Hole Symposium, scheduled on Friday.
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For those forex traders that respect technical levels, Ilya Spivak mentions near-term support rests at 1.6533 (38.2% Fib Exp.) and near-term resistance at 1.6611 (23.6% Fib Exp.). He remains flat for now and remains opportunistic for a correction higher to enter a short position. Meanwhile according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the GBP/USD stands at 1.54 as 61 percent of traders are long.
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