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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

UK consumer spending top estimates; EU summit begins

09:03 17 October 2019

Summary:

  • UK retail sales M/M: 0.0% vs -0.2% M/M exp. -0.3% prior

  • Brexit remains front and centre for GBP

  • EU summit begins; DUP support questioned

 

According to the latest economic data, consumer spending once more came in better than expected last month with the retail sales figures for September topping consensus forecasts. This has been a common theme for much of the year with 7 of the 9 months seeing this data point come in better than expected reflecting a resilient level of consumer spending in the face of great uncertainty. On the flip side this could just as well be explained by overly pessimistic economists, with the last 8 consensus forecasts predicting month-on-month drops.

 

The data for September was as follows:

 
  • Retail sales M/M: 0.0% vs -0.2% exp. -0.3% prior.

  • Retail sales Y/Y: +3.1% vs +3.1% exp. +2.6% prior - revised down from +2.7%

  • Ex autos and fuel: M/M: +0.2% vs -0.1% exp. -0.3% prior. 

  • Ex autos and fuel Y/Y: +3.0% vs +2.9% exp. +2.2% prior. 

 

 

A longer term view suggests that the growth rate of retail sales are consolidating with not too much to be taken from the current level of activity. Source: XTB Macrobond 

 

This is the third UK data point in as many days but the impact they have had on the market could be described as fleeting at best, with traders’ continuing to focus on Brexit and chase the latest headlines.

 

The pound is trading a little lower on the day after news broke earlier that the DUP is not on board with the current suggestions on customs. With the EU summit beginning today, the general feeling is that the majority of a new deal has been agreed upon but there are still a couple issues that need to be ironed out before it can be brought back for a vote in the UK parliament. The chances of it passing through the house of commons also rest on a knife edge, with the ERG likely to support it while the DUP seem to be holding out. 

 

There have been separate reports that the opposition would back an amendment to put the deal to a confirmatory referendum but as is often the case with Labour’s Brexit stance it is not clear that the whole party are singing from the same hymn sheet. 

 

Overall sterling remains close to recent highs and it is worthwhile drawing a comparison with the moves seen in the run-up to the 2016 referendum. The 6 day’s leading into the vote over 3 years ago saw GBPUSD rise by around 7%, and from last Thursday’s low to yesterday’s high marked a gain of 5.5%. Given the clear differences between the current environment and that back in June 2016 it would be highly surprising if we got anywhere near as large a drop should we get a major disappointment in the coming days. Having said that, there is a clear similarity in the markets with investors positioning themselves for a favourable outcome that could well not transpire, and should this play out then a swift reversal of the moves seen in the week would ensue.    

Brexit headlines continue to cause short term swings in GBPUSD, but the bigger picture remains constructive from a technical point of view as long as price remains above the bottom of the H1 cloud around 1.2655. Source: xStation      

 

This content has been created by X-Trade Brokers Dom Maklerski S.A. This service is provided by X-Trade Brokers Dom Maklerski S.A. (X-Trade Brokers Brokerage House joint-stock company), with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. X-Trade Brokers Dom Maklerski S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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