GBPUSD Looks for Direction Ahead of the U.K. Retail Sales Report

Fundamental Outlook

Retail sales in the U.K. are expected to advance for the fourth time in the past five months, according to the median estimate of 23 economists surveyed by Bloomberg News. Sales are forecasted to rise 0.3 percent after climbing 0.7 percent the previous month, marking its slowest monthly gain in three months. Retail sales in Great Britain may continue to lose momentum in the coming months as the economy faces tight credit conditions and an uncertain labor market. Additionally, sales could also stay depressed longer than expected as consumer confidence continues to weaken. The Nationwide sentiment index for the month of July tumbled to the lowest level since April 2009, and will likely continue its southern journey in the near term as the government implements tough austerity measures to battle its boiling budget deficit. In turn, the looming fiscal squeeze will undoubtedly weigh on household finances and sentiment. All in all, I do not rule out retail sales figures missing economists’ expectations as tax increases, job cuts, and weakening consumer sentiment continue to weigh on growth.

Technical Outlook

USD/CAD

GBP/USD: The British pound has rallied against the U.S. dollar since the middle of May and is now at the crossroads ahead of the U.K. retail sales report. Indeed, price action continues to maintain its rising trend line dating back from June. Over the past couple of sessions, the pair has remained capped by 1.5700. Going forward, GBP traders will look for a clear break above this level before considering a long position, and targeting the high from earlier this month.

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Written by Michael Wright, Daily FX Research To Receive Future Articles by Email, Please contact me at mwright@fxcm.com Michael Wright is the author of FX Headlines, Fundamentals vs. Technical's, Weekly Spotlight, and Forex Trading Weekly Forecast