Friday's data on British retail sales surprised many experts who did not expect such a notable change in March. According to the ONS, sales in the retail sector dropped 1.8% on a seasonally-adjusted basis, while analysts anticipated only a 0.3% decrease. Similarly, on a quarterly basis, retail sales lost 1.4%, which was the first negative contribution to GDP growth since the Q4 of 2013. The following decline was a result of a change in average store prices, which were continuously increasing since January. In fact, in March, consumer prices reached the highest peak since December 2014.
In addition, in volume terms, goods bought in most of the sub-sectors, except for department stores and household goods stores, decreased. For instance, the amount of money spent in food stores in March advanced 0.3%, while the amount of purchased goods diminished 0.5% compared to the previous month. In contrast to traditional retail sales, data on online stores showed that British consumers in March spent on average 1.0B pounds per week on online stores, a 19.5% rise compared to the same period a year ago. Retail sales are tightly connected to consumer spending. Thus, weak retail sales combined with rising inflation suggest that consumer spending will unlikely provide a significant support to economic growth.
Another uneventful Monday
GBP/USD keeps gravitating towards 1.28
Downbeat UK Retail Sales were unable to relieve the British Pound of its strength, as it erased all intraday losses and held its positions above the 1.28 against the US Dollar on Friday. However, further upside momentum seems unlikely, as the 1.2850 level keeps providing relatively strong psychological resistance, now also bolstered by the upper Bollinger band. At the same time, a sharp bearish development is doubtful, due to the weekly PP and the monthly R1 forming a tough demand area at 1.2745. Until a solid market mover is presented the Cable is expected to remain within this trading range, namely between 1.2750 and 1.2850.
Daily chart
Hourly chart
Traders are equally divided
Market sentiment remains in perfect equilibrium today, but the share of buy orders is higher—taking up 60% of the market (previously 57%).
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 57% of all open positions are short and the remaining 43% are long. Meanwhile, sentiment at Saxo Bank worsened again over the day, with 55% of traders now being short and the other 45% being long the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
By the end of the next three months traders believe the Cable is to rise above the 1.26 major level, as 56% of survey participants believe so. While the current price is around 1.28, the average forecast for July 24 is 1.2648. The 1.28-1.30 and the 1.30-1.32 ranges are now the most popular price intervals, both having 16% of the votes, while on the second place is the 1.18-1.20 price range, with 12% of poll participants choosing it. Furthermore, the 1.20-1.22 and the 1.34-1.36 intervals were each selected by 10% of the voters.