Sales in the United Kingdom dropped for the third straight month in January, indicating that consumers started feeling the pressure of higher prices and slower wage growth. According to the official data published by the British Office for National Statistics on Friday, retail sales slid 0.3% over the previous month, coming in short of analysts' expectations for a 1.0% increase and following a downwardly revised 2.1% slide in December. If compared with the same month a year ago, sales rose at the slowest pace since November 2013, jumping 1.5%. The downmove was mainly driven by higher prices of fuel and food at both conventional and online stores, which rose 1.9% on average in January when compared to the same month a year ago.
At this point, analysts worldwide expect prices to be on an uptrend through the year, as retailers are struggling to keep their businesses afloat following the devaluation of the Sterling caused by the decision of the UK to the European Union. Nevertheless, despite expectations for inflation to hit 3% and above this year, economists are eyeing rather anaemic wage growth, with real income being at risk of posting its worst year since 2013.
US Services and Manufacturing PMIs due on Tuesday
GBP/USD attempts to erase Friday's losses
The Cable edged lower on Friday, with the psychological support around 1.2460/40 failing to limit the losses, but the demand cluster circa 1.2420 succeeding. However, the GBP/USD pair opened with a small bearish gap today, causing the mentioned demand area to be pierced. This does not imply the Sterling is doomed to keep falling; the price is still expected to recover, with the nearest meaningful resistance being at 1.2449, represented by the weekly PP. Nevertheless, the weekly PP is unlikely to hold the Pound for long, even though technical studies are unable to confirm a recovery is due.
Daily chart
Hourly chart
Traders mostly bullish
There a 59% of traders with a positive outlook towards the Sterling today, unchanged since Friday. At the same time, the portion of sell orders inched up from 50 to 55%.
A slightly less optimistic situation is observed elsewhere. For example, 58% of positions open at OANDA are currently long. This is more than the share of shorts (42%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 64% of traders now being long and the other 36% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to rise above the 1.22 major level, as 56% of survey participants believe so. While the current price is around 1.25, the average forecast for May 20 is 1.2467. The 1.20-1.22 interval is now the most popular price interval, having 16% of the votes, while on the second place are the 1.28-1.30 and the 1.30-1.32 price ranges, both with 11% of poll participants choosing them. Furthermore, the 1.14-1.16, 1.18-1.20 and the 1.34-1.36 intervals were each chosen by 10% of the voters.