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GBP/USD Surges After Post-Brexit Retail Sales Crush Expectations

GBP/USD Surges After Post-Brexit Retail Sales Crush Expectations

Oded Shimoni, Junior Currency Analyst

Talking Points:

- Retail Sales increased 5.9% year-on-year versus 4.2% expected

- All sectors showed growth with the main contribution coming from non-food stores

- GBP/USD surged higher immediately on the news

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The British Pound spiked higher versus all other major currencies after today's UK Retail Sales report printed figures significantly higher than expected.

It’s important to note that the release covers a 4 week period from 3 July to 30 July 2016 and therefore included data following the Brexit vote.

The Office for National Statistics (ONS) reported that Retail Sales (including auto fuel) increased 5.9% year-on-year versus 4.2% expected, with a prior 4.3% increase.

All sectors showed growth with the main contribution coming from non-food stores.

The month-on-moth figure for the gauge rose 1.4% versus 0.3% expected, with a -0.9% prior print.

Core Retail Sales (which excludes auto fuel) beat expectations as well, with the year-on-year number signaling a rise of 5.4% versus 3.9% prior and expected rise.

Today’s figures join the latest Jobs report from the UK signaling that hard economic data has yet to suffer post Brexit, while inflation figures earlier this week showed inflation rose sooner than expected.

In turn, these latest numbers might have been interpreted by the market as such that initial worries from Brexit have yet to filter through to consumer spending, as opposed to worries expressed by businesses via different confidence surveys.

If data remains upbeat, it might stand in sharp contrast to one of the factors that led to the Brexit fall- an anticipated downturn in the economy.

While general uncertainty regarding the Brexit situation is likely to remain for a longer period of time, data such as today, while very initial, may raise questions about further BOE easing and the presumed downturn in the UK economy, possibly underpinning the British Pound.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 57.7% of traders are long the GBP/USD at the time of writing, quickly reducing longs on this spike higher.

You can find more info about the DailyFX SSI indicator here

GBP/USD 5-Minute Chart: August 18, 2016

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

Follow him on Twitter at @OdedShimoni

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

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