UK consumer spending as represented by the retail sales dropped 0.5% in March, which amounts to 3.8% rise in the annualized terms. The core number is also seen dropping 0.5%, which would be bad news.
Retail sales could fall more than expected-
The odds of a weaker-than-expected retail sales appear high if we take into account the weakness in spending as shown by the lead indicators released earlier this month-
· A survey by the payment company Visa released earlier this month showed Consumer spending in the UK grew at the slowest pace in more than three years in the first three months of 2017. Inflation was the culprit, the survey showed.
· The British Retail Consortium (BRC) data released on Apr 10 showed the retail sales fell 1% as opposed to the expected drop of 0.5%. Again, it was the rising inflation.
Both lead indicators clearly suggest the rising cost of living is having an undesirable impact on the spending. It wouldn’t be a surprise for you if the retail sales print misses estimates.
What would happen to the Pound?
“The pound is still the most hated currency”, said by Nicole Elliot, during her interview with Tip TV on Thursday. We cannot agree more, but that does not mean the quid cannot extend the rally. In fact the sentiment/positioning is at extreme and that always points to a potential for sharp reaction in the opposite chart.
The spot has recently breached the key resistance at 1.2640 (23.6% of Brexit sell-off) and is trading above 1.2840. It looks set to revisit 1.29 and possibly to 1.30 levels if the retail sales prints better-than-estimates.
Meanwhile, a weaker-than-expected retail sales figure could push the spot back to 1.2640. However, only a daily close below the same would signal bullish invalidation.
Retail sales could fall more than expected-
The odds of a weaker-than-expected retail sales appear high if we take into account the weakness in spending as shown by the lead indicators released earlier this month-
· A survey by the payment company Visa released earlier this month showed Consumer spending in the UK grew at the slowest pace in more than three years in the first three months of 2017. Inflation was the culprit, the survey showed.
· The British Retail Consortium (BRC) data released on Apr 10 showed the retail sales fell 1% as opposed to the expected drop of 0.5%. Again, it was the rising inflation.
Both lead indicators clearly suggest the rising cost of living is having an undesirable impact on the spending. It wouldn’t be a surprise for you if the retail sales print misses estimates.
What would happen to the Pound?
“The pound is still the most hated currency”, said by Nicole Elliot, during her interview with Tip TV on Thursday. We cannot agree more, but that does not mean the quid cannot extend the rally. In fact the sentiment/positioning is at extreme and that always points to a potential for sharp reaction in the opposite chart.
The spot has recently breached the key resistance at 1.2640 (23.6% of Brexit sell-off) and is trading above 1.2840. It looks set to revisit 1.29 and possibly to 1.30 levels if the retail sales prints better-than-estimates.
Meanwhile, a weaker-than-expected retail sales figure could push the spot back to 1.2640. However, only a daily close below the same would signal bullish invalidation.
