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GBP/USD Hits a One-Week Low on Dismal Retail Sales Data

GBP/USD Hits a One-Week Low on Dismal Retail Sales Data

Nick Cawley, Strategist

Talking Points

- UK retail sales fall in September, while the previous month’s numbers are all revised lower.

- GBP/USD falls to a one-week low as traders now wait to see the outcome of this week’s EU Summit meeting.

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A poor set of UK retail sales figures for September sent GBP/USD tumbling to a one-week low astraders question whether the Bank of England will raise rates by 0.25% in November, as had widely been expected. On a month-on-month basis, sales fell by 0.7% ex-fuel and by 0.8% inc-fuel, while on an annual basis, sales ex-fuel fell to 1.6% from 2.6% in September, while sales inc-fuel fell to 1.2% from a prior 2.3%.

Commenting on today’s release, ONS senior statistician Kate Davies wrote, “September’s retail sales saw a monthly decline of 0.8%, reversing August’s growth. However there is a continuation of the underlying trend of steady growth in sales volumes following a weak start to the year, and a background of generally rising prices.”

GBP/USD, which had already slipped ahead of the figures – something that we talked about at last Friday’s UK Week Ahead Webinar – fell to a one-week low of 1.3130. Traders are now looking ahead to news from this week’s EU27 Summit meeting where Brexit discussions are ongoing and fraught. Any signs that the EU or the UK are unwilling to moderate their stance may see Sterling falling further.

Chart: GBPUSD One Minute Timeframe (October 19, 2017)

GBP/USD Hits a One-Week Low on Dismal Retail Sales Data

Chart by IG

Retail trader data shows 50.8% of traders are net-long with the ratio of traders long to short at 1.03 to 1. The number of traders net-long is 9.6% lower than yesterday and 6.9% lower from last week, while the number of traders net-short is 10.7% lower than yesterday and 9.1% lower from last week.We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias.

For the latest IG Client Sentiment indicators, click here

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

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

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