When are the UK retail sales and how could they affect GBP/USD?
UK Retail Sales Overview
Having witnessed upbeat inflation numbers for January on Wednesday, GBP/USD traders are waiting for Friday’s UK Retail Sales, to be published at 07:00 GMT, for fresh impulse. The key data to British GDP, Retail Sales, is expected to drop from 0.3% prior to -2.5% MoM. The same is likely to weigh on the total retail sales that are seen declining from +2.9% to -1.3% during the first month of 2021.
Additionally, core retail sales, stripping the basket off motor fuel sales, are also likely to print downbeat readings with -2.6% MoM and +2.4% YoY numbers compared to +0.4% and +6.4% respective priors.
It should be noted that the preliminary readings of the UK’s Manufacturing and Services PMIs for January, up for publishing near 09:30 GMT Friday, also become important data for the cable traders. However, BOE has more like for the GDP and hence Retail Sales becomes increasingly important as it contributed heavily to the output.
Deviation impact on GBP/USD
Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 10 and 80 pips in deviations up to 3.5 to -1.5, although in some cases, if notable enough, can fuel movements of up to 150 pips.
How could it affect GBP/USD?
GBP/USD trims early Asian session weakness while taking rounds to the highest since April 2018 ahead of Friday’s London open. Although markets cheer the hopes of the US stimulus and rising Treasury yields, the latest worries over the coronavirus (COVID-19) variants seemed to have challenged the bulls. Also negative for the cable could be the fears of liquidity exhaustion from the equities amid rising bond yields.
However, recently upbeat economics from the UK have backed the Bank of England’s (BOE) cautious optimism. As a result, one more positive could easily propel the sterling beyond the 1.4000 threshold while any disappointment may wait for confirmations as the PMIs are in the next train.
TD Securities anticipate a sharp drop in the UK Retail Sales figures as they say,
We look for retail sales to post a sharp -6.6% m/m decline in January (market forecast -2.6%), though this is only a fraction of the -18% fall that we saw in April, the first full month of the first lockdown. We look for food store sales to be the primary source of strength, similar to the November lockdown, and with food store sales likely due for some degree of rebound anyways after a very weak December. On the other side of the coin, we look for sectors like clothing/footwear and household goods to post double-digit falls during January, though for their levels to still fall less than halfway toward their spring 2020 troughs.
Technically, sterling’s ability to keep the previous day’s breakout of February 16 top joins the successful trading above 50-bar SMA, also keeping the 13-day-old rising channel, favor the bulls. As a result, any pullback beyond the stated SMA level and the channel’s support line, around 1.3860, becomes irrelevant for the bears. However, a downside break of 1.3950 can entertain short-term sellers of the GBP/USD. In a case where the cable drops below 1.3860, the late-January tops surrounding 1.3760-55 will be in the spotlight.
Key notes
Week ahead: China GDP, Biden Inauguration, ECB meeting, UK retail sales, public finances
GBP/USD Price Analysis: Bullish impulse set to cross 1.4000 inside short-term rising channel
GBP/USD Forecast: Eyeing the 1.4000 threshold
About the UK Retail Sales
The retail sales released by the Office for National Statistics (ONS) measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive, or bullish for the GBP, while a low reading is seen as negative or bearish.