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GBPUSD Shrugs Off Poor UK Retail Sales, Brexit Optimism Dominates

GBPUSD Shrugs Off Poor UK Retail Sales, Brexit Optimism Dominates

Martin Essex, MSTA, Analyst

GBPUSD Talking Points:

- GBP fell after news that UK retail sales in December suffered their biggest fall month/month since June 2016 and recorded their worst December since 2010.

- However, GBPUSD soon stabilized on continuing optimism that a hard Brexit can be avoided.

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GBPUSD fell back Friday after news that UK retail sales in December were significantly worse than expected. The headline month/month figure was down 1.5% while there was a fall of 1.6% excluding fuel. Both drops were the largest since June 2016 and retail sales volumes for 2017 as a whole were up just 1.9%, the weakest annual growth rate since 2013.

The worse than predicted figures sent GBPUSD lower but the pair soon stabilized on continuing optimism that the UK and the EU are heading for a soft Brexit – a prospect likely to support the pair despite a comment from the Office for National Statistics that the longer-term picture for the UK is of slowing growth as increased prices squeeze spending.

GPPUSD Price Chart Five-Minute Timeframe (January 18 – January 19, 2018)

GBPUSD Shrugs Off Poor UK Retail Sales, Brexit Optimism Dominates

Chart by IG

Brexit optimism

The European Union (Withdrawal) Bill, which repeals the 1972 law that brought the UK into the EU and transfers EU law into British law, was passed by the UK House of Commons on Wednesday, and a visit to the UK by French President Emmanuel Macron was seen to have gone smoothly – with the two countries reaching a deal on their common border and France agreeing to loan the UK the Bayeux Tapestry.

IG client sentiment bullish

Looking ahead, IG Client Sentiment data are currently sending a bullish signal and the GBPUSD pair remains close to its highest level since June 24, 2016, the day after British electors voted to leave the EU.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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

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