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UK Retail Sales Blast Expectations and Send the Pound Higher

UK Retail Sales Blast Expectations and Send the Pound Higher

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK retail sales rise 1.1% in July, more than expected -> Retail sales improve expectations for economic expansion -> GBP/USD rallies to a new monthly high

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The Pound rallied to a new monthly high against the US Dollar, as UK retail sales rose significantly more than expected in July.

Retail sales (excluding auto fuels) improved 1.1% in the month of July, significantly beating expectations for a 0.6% rise in sales and better than the 0.2% sales increase seen in June. Including auto fuels, retail sales also increased 1.1% in July, thereby beating expectations for a 0.7% rise in sales. Retail sales (excluding auto fuels) rose 3.1% from July 2012, according to the UK Office for National Statistics.

Better than expected retail sales bode well for expectations for UK economic expansion, which was last reported at 0.6% in the first quarter of this year. The improved retail sales followed a recent report of the PMI’s for manufacturing and services at multi-year highs in July. The Bank of England recently connected monetary policy to the unemployment rate, which means that improved economic performance is Pound positive.

That is why the Pound rallied 40 pips against the US Dollar in Forex markets following the release. GBP/USD may next see resistance by a six month high at 1.5751, which is also near a 100% expansion of the rally in July. Cable may see support by the key 1.5500 level.

The retail sales release was the only major release reported in today’s European session, but the US consumer price index will be released an hour ahead of the open of US equity markets.

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GBPUSD Daily: August 15, 2013

UK_Retail_Sales_Blasts_Expectations_and_Sends_the_Pound_Higher_body_gbpusd.png, UK Retail Sales Blast Expectations and Send the Pound Higher

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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