Sterling Rallies as UK Retail Sales Remain Steady
THE TAKEAWAY: July UK retail sales remain steady with June, beats expectations -> Possible sign of a stalling economy -> Sterling rallies
UK retail sales (excluding auto fuel) surprised markets when they were reported unchanged in July, beating expectations for a 0.2% drop in sales. However, two months of higher retail sales were ended by July’s figure, and the month’s retail sales beat July 2011 sales by 3.3%, the biggest yearly gain in 4 years. Furthermore, June’s retail sales were revised higher to 1.1%, the biggest monthly retail sales change in over a year, according to the Office for National Statistics.
The average weekly spending on retail in July 2012 was 6.7 billion Pounds. Including auto fuel sales, retail sales were up 0.3% in July, beating expectations for a 0.1% drop.
Just yesterday, it was reported that the UK unexpectedly added 5.9K jobs, and minutes from the last BoE meeting said a lot of the losses from the second quarter will be made up in Q3. Therefore, while July’s retail sales were not declining, they did bring an end to increasing sales, and could indicate further economic troubles ahead for the UK economy.
The British Pound jumped 50 points against the US Dollar in the minutes before and following the retail sales release. GBPUSD has been trading in an upward trend over the past 11 days, and resistance might be provided by the upward channel around 1.5726.
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