The British pound found some much needed relief in yesterday’s trading session after a surprise jump in retail sales figures showed that despite the uncertainties surrounding Brexit, British consumers are still opening their wallets which is a good sign for the economy.
Positive figures like these leads to the belief that the UK economy will avoid a recession later in the year which is 2 consecutive quarters of negative growth and this may provide some temporary support for the pound.
"The rise in retail sales in July was encouraging and supports our view that the economy has picked up in Q3 after contracting by 0.2 percent in Q2," says Gabriella Dickens at Capital Economics.
"Of course, the retail sector only makes up about 30% of total household spending. But spending growth off the high street appears to have remained fairly steady. So July’s figures leave us more confident that the economy avoided another contraction in Q3." She added.
Some analysts however say that any economic data whether positive or negative will be overshadowed by the current Brexit debacle and as the deadline of October 31st nears the odds of a no deal Brexit will grow.
The Market is currently not convinced that a No deal Brexit is the likely scenario but as time goes on and this option begins to become main stream, the pound may continue its downtrend and further losses of up to 10 percent are not out of the question
"Heightened Brexit uncertainty and the ongoing slowdown in global growth have increased downside risks for the UK economy heading into the second half of this year. We now believe that a No Deal Brexit is more likely than not, and it could tip the UK economy into recession," says Derek Halpenny, Head of Research at MUFG.
"The UK has set to conditions for negotiations – to agree to reopen the Withdrawal Agreement for re-negotiation and to scrap the backstop. European leaders have consistently stated that the Withdrawal Agreement and the backstop in it cannot now be changed. We are heading for a major showdown that will likely involve some degree of constitutional crisis, financial volatility and probably a general election," he added.
Activity of FIBO Group, Ltd. Company is regulated by the Financial Services Commission (FSC), registration number of the licence: SIBA/L/14/1063.
Trading on Forex market implies serious risk including the risk of loss of all the funds invested. Please, take into account that trading on the forex market isn’t suitable for all investors and traders.
Unfortunately the services of the company aren’t provided to residents of Austria, Great Britain, Iraq, North Korea and the USA.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.