UK retail sales rebounded markedly last month despite the post=Brexit sharp fall in the value of the Pound. The Office for National Statistics reported on Thursday that retail sales surged 2.3% in April, following the preceding month's upwardly revised fall of 1.4% and topping expectations for a 1.2% increase. The unexpected climb suggested that consumer spending also rebounded in April and would support economic growth in the second quarter. Last month's gain was mainly driven by the good weather that boosted demand for hardware and household goods.
Meanwhile, market analysts expected sales volumes to rise 2.1% in the reported month. After the release, the Sterling rose above $1.30 for the first time since September 2016 and hit $1.3028 for a short time. Excluding automobiles, sales rose 2% on a monthly basis in April. Despite April's stronger than expected performance, retail sales are set to drop again in the upcoming months due to surging inflation.
Nothing relevant to the pair
GBP/USD recovers yesterday's losses
The morning session started rather calmly for GBP/USD with no strong market movers pushing the pair to either side. The Pound closed Thursday's session in the red area, thus leaving upside potential for the pair to reach the upper channel boundary today. Up to now, the rate has been appreciating gradually, suggesting that bulls may prevail to lead the currency towards the weekly R1 or even the channel boundary at 1.2970 and 1.3000, respectively. GBP/USD changing to the downside is not very likely today, taking into account bullish indicators that favour the above scenario over the Pound pushing back down to the 20-day SMA.
Daily chart
Hourly chart
Bearish sentiment creeps in
Traders have turned bearish on the pair, as 52% of open positions are short. However, 55% of pending orders are to buy the Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank worsened again, with 60% of traders now being short and the other 40% - long on 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 1.30 major level, as 64% of survey participants believe so. While the current price is around 1.30, the average forecast for August 19 is 1.31. The 1.34-1.36 range is now the most popular price interval, having 20% of the votes.