UK retail sales disappointment leaves GBP/USD stuck to its $1.4000 target
|
The UK retail sales experienced the worst slump since June 2016 with retailers contributing almost nothing to GDP growth in fourth quarter.
UK retail sales slump
The UK retail sales reported a -1.5% monthly slump in December compared to -0.6% fall expected by markets. Core retail sales that are stripped of motor fuel sales fell 1.6% lower in December, double the expected 0.8% monthly fall.
At the same time, the total, as well as core retail sales, failed to meet the expectation of accelerating on a year-to-year basis.
Sales of household goods plunged 5.3% over the month in December while clothing sales fell 1%. Only department stores saw an improvement, with sales rising 0.6%. The retail sales rose only 0.4% for on the quarterly basis during the final three months of the year, halving the growth rate in the previous quarter with no contribution to GDP growth during final three months of last year.
FX market implications
The negative tone of the UK retail sales had a limited impact on GBP/USD. While the initial knee-jerk reaction of GBP/USD was on the downside, the currency pair soon recovers to trade up at daily highs of $1.3940. Traders realized the negative implications of the UK retail sales report and sold GBP/USD towards $ 1.2900, but the major risk factor for the currency pair remains the US political development with the US government shutdown applicable since this midnight should the US Senate fail to approve financing bill.
The technical indicators on the short-term chart indicate a potential for the downside, especially with Slow Stochastic turning lower within the Overbought territory.
GBP/USD 15-minute chart
Looking at the longer-term horizon, the GBP/USD busted the resistance at $1.3850 representing 61.8% Fibonacci retracement line of post-Brexit slide lower. Although GBP/USD initially failed to close above that key resistance line on Wednesday, its ride higher continued over Thursday with no barrier between the current spot and the round big figure of $1.4000.
The FXStreet confluence indicator that analyses multi-factor coincidence of different technical barriers points to $1.3944 as a near-term resistance on a daily chart with no big barrier for GBP/USD until round big figure of $1.4000.
FXStreet confluence indicator for GBP/USD
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.