Retail sales are considered to be highly volatile, hence, the figure should differ significantly from the expected value in order to have a strong market impact, even though retail sales is a primary gauge of consumer spending, which represents the majority of overall economic activity.
This time a release of the U.K. retail sales pushed the cable first lower to 1.6611, however, later, the pair soared back to 1.6688 on profit taking. The ONS said both total and core retail sales plunged 1.5% between December and January, posting significant deceleration from previous month's readings. On a yearly basis sales advanced below forecasts to 4.3% compared with projections of 5% gain. The main upside pressure came from a 8% surge in non-food stores. Analysts have expected data can surprise markets to the downside, as household felt the squeeze following the festive holiday season. Despite the deterioration, the quantity bought over the period remains high, suggesting the quarterly movement jumped 1.1%, confirming growth in the key retail sector.
What is more important is the fact, public finances showed a surprised weakness in January, posting a 4.8 billion pound surplus, compared with a 6 billion a year ago and missing analysts' projections fro a 8 billion excess.
© Dukascopy Bank SA