GBPUSD, H1
UK July retail sales rebounded from June weakness more than expected, with sales expanding 0.7% m/m after contracting by 0.5% in the month prior. The median forecast had been for a more moderate increase of 0.2% m/m. The contraction in June was pinned on hot weather and the national fixation on the World Cup, which combined with lower footfall in non-food stores and online purchases, and while the weather remained sweltering in July, there was evidently some pent-up demand at play, along with purchases relating to summer holidays. Sales rose by 3.5% on the y/y comparison, above the median expectation for 2.9%. Online spending rose to a new record proportion of all retailing, at 18.2%, a trend which has become increasing evident by announced downsizing of outlets by major chains.
The World Cup and good weather encouraged the Brits to open their purse strings during July. However, the longer term outlook remains pressured for the Pound with weak wage growth, BoE rate hikes adding to costs for consumers and businesses and the spectre of Brexit, all clouding the outlook.
Intra-day GBPUSD rallied overnight and into R1 at 1.2732, in the wake of the data release, before a slip back down to the daily pivot point at 1.2696. The psychological 1.2700 remains key today.
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Stuart Cowell
Head Market Analyst
HotForex
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