UK retail sales drop; Cold weather blamed

Summary:

  • UK retail sales M/M : -0.5% vs -0.5% exp

  • Unseasonably cold weather cited behind the drop

  • Pound continues to recover; GBPUSD > 1.27

 

A drop in the latest consumer spending figures for the UK have raised further concerns surrounding the health of the economy and also they don’t bode well for the second quarter growth figures. The month on month drop of 0.5% was inline with expectations after a prior reading of 0.0% and the print ends a run of 4 consecutive beats for this metric, as retail sales have surprised to the upside for several months before this latest reading which was for May.   

 After a good run of late, the most recent UK retail sales figures turned negative once more and while this drop was in line with consensus forecasts it is still a little worrisome nonetheless. Source: Bloomberg, Forexlive

 

As is often the case with spending figures, the poor performance has been blamed on the weather with an unseasonably cold period contributing to a considerable decline in clothing sales. A strong labour market with the unemployment rate at its lowest level since 1974 has helped retail sales recover so far this year after a poor showing last Autumn, but the outlook remains not too favourable with the ongoing lack of clarity n Brexit. Online sales continue to show rapid growth as traditional outlets such as department stores and household goods contracted.

The rapid rise in internet sales remains a positive for the retail market, but this is coming at the expense of department stores who continue to struggle. Source: ONS, FT

 

After falling down to its lowest level of the year (barring the early Jan JPY-led flash crash) earlier this week there’s been a pretty impressive recovery in the Pound, helped in no small way by the dovish shifts seen from the ECB and the Fed. Wednesday’s gains confirmed a morning star formation on the daily chart for GBPUSD and price is now back above the $1.27 handle and not too far from prior swing resistance at 1.2775.

The GBPUSD pair is now back above the 21 EMA (yellow line) which is a pretty rare occurrence in the past 6 weeks or so. Is the trend turning higher? Source: xStation      

 

 

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