UK retail sales posted the largest drop in almost seven years in the three-month period to February amid higher fuel prices that put pressure on household budgets. Nevertheless, the Office for National Statistics reported on Thursday that British retail sales advanced 1.4% last month, following the preceding month's fall of 0.5% and surpassing analysts' expectations for a 0.4% rise. Despite a stronger-than-expected rebound, in the three months to February sales dropped 1.4%, compared to a 0.5% decline seen in the three-month period to January. That marked the biggest fall since March 2010. On an annual basis, sales were up 3.7%, whereas analysts anticipated a 2.6% increase after a 1.0% gain registered in January.
Earlier this week, the ONS reported consumer prices jumped 2.3%, the highest in more than three years, while inflation used for calculation retail sales growth advanced 2.8%, the highest since March 2012. The ONS also noted that higher inflation, mainly driven by the weak Pound, started hurting consumers' pockets. Consumer spending is closely followed by the Bank of England, as it accounts for nearly two-thirds of UK output. On Thursday, one of the largest apparel retailers in Britain Next said it was "extremely cautious" about prospects for the year ahead after it reported a 4% annual profit decline.
US Durable Goods Orders, Markit Services and Manufacturing PMIs
GBP/USD risks falling back under 1.25
Thursday was a relatively productive day for the British Pound, as it successfully stabilised above the 1.25 mark. However, downside risks are now higher, due to this major level being a tough psychological resistance, which tends to trigger U-turns lately, despite being crossed to the upside. As a result, the Cable could be seen undergoing a bearish correction today, with the monthly PP being a solid obstacle where support might be found. A much sharper decline is also possible, in which case the 55 and the 100-day SMAs are to limit the losses circa 1.24. Nevertheless, the GBP/USD is expected to continue recovering until the 1.27 handle is reached within the next month.
Daily chart
Hourly chart
Traders mostly bullish
Traders' sentiment remains bullish, but now at 61% (previously 63%). The number of orders to sell the Sterling slid from 71 to 56%.
A slightly less optimistic situation is observed elsewhere. For example, 55% of positions open at OANDA are currently long. This is more than the share of shorts (45%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is close to equilibrium, with 52% of traders now being long and the other 48% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
By the end of the next three months traders expect the Cable to rise above the 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.23, the average forecast for June 24 is 1.2289. The 1.14-1.16 range is now the most popular price interval, having 15% of the votes, while on the second place is the 1.30-1.32 price range, with 13% of poll participants choosing it. Furthermore, the 1.16-1.18 and the 1.28-1.30 intervals were both chosen by 11% of the voters.