UK consumer spending remains solid; GBP ticks higher

Summary:

• UK retail sales for July M/M: +0.2% vs -0.2%. Prior +0.9%

• GBPCAD holding key support around 1.5750?

• FTSE near 5-month low; RBS tumbles after analyst downgrade

The UK consumer continues to show impressive resilience to the slowing economy and political uncertainty with retail sales figures for July topping estimates. A reading of +0.2% marked an unexpected rise, against consensus forecasts for a print of -0.2%. THe prior reading was revised lower by 10 basis points to +0.9%. This is the 6th time this year that monthly figures have been better than expected, with strong growth of 6.9% seen in non-store retailing. Another bright spot was department stores where growth increased for the first time in 2019 after 6 consecutive monthly declines. There’s been a little uptick seen in the pound after the release, but as was the case for yesterday’s inflation figures and Tuesday’s wage numbers, economic data remains of secondary importance for sterling.   

GBPCAD has seen a bit of a bounce around a key prior support zone above 1.5750. The market has dropped roughly 1800 pips in the last 3 months and those looking for potential long setups in the pound may want to keep this on their radar. Source: xStation   

The FTSE closed at its lowest level in 5months yesterday, dragged lower by a souring of risk sentiment as markets reversed the moves seen on Tuesday after the boost from the Chinese tariff delay failed to have a lasting impact. This morning there’s been further weakness and there’s a growing danger that things could go from bad to worse for stock markets before the week is out.   

The FTSE 100 is another market testing prior support, in this case around 7055. Price is back below the 200 day SMA once more and a breach of the aforementioned support could lead to further downside towards the Dec 18 low of 6540. Source: xStation 

The worst performer on the UK blue chip index is RBS, with shares in the bank falling by more than 8%. The chief cause of the decline appears to be due to a number of brokers slashing their price targets for the stock. Citing disappointing second quarter results USB cut its target price to 265p from 285p but maintained its “Buy” rating.  "With yield curves implying rate cuts ahead, Brexit uncertainty high and 2Q19 results a 7% miss driven by net interest income we weren't surprised to see the share weak, post reporting. On Wednesday Macquarie downgraded its stance to “Neutral” from “Buy” lowering its target to 201p from 246p - pointing to the latest results as the justification. Yesterday Goldman Sachs also reiterated its “buy” rating but cut the target by 35p to 325p.

RBS shares have tumbled to their lowest level since 2016 after a spate of brokers downgraded their view of the bank. Source: xStation