Summary:
- Big bounce in UK retail sales
- Pleasing data but positives may be exaggerated
- GBPUSD remains near potentially key support 1.2975-1.3000
An unexpected rise in UK retail sales for March caused a pop higher in the pound with the currency bouncing from the $1.30 handle in response but the strength has proved short-lived and as the dust settles the pair is back near its daily lows. A 1.1% rise in month-on-month terms represents a big beat on the -0.3% expected, and the prior reading was revised higher by 20 basis points to 0.6% for good measure. The year-on-year reading was a bumper +6.7% after 4.0% last time out, but this is to last March falling out of the data set, which was a very bad month for consumer spending due to adverse weather effects caused by the Beast from the East. The data is the third release in three days from the UK, which on the whole is pretty mixed for the pound with today’s positives mitigating the soft inflation data.
Big jump seen in UK retail sales but the rise is exaggerated in Y/Y terms by the March 2018 data rolling into the base level - a month that was particularly poor for consumer spending due to adverse weather caused by the Beast from the East. Source: XTB Macrobond
The bigger picture for the pound remains one of consolidation with price still trading in the relatively narrow recent range. The region from 1.2975-1.3000 appears a pretty obvious line in the sand and potentially pivotal support. The market is drifting back towards this level once more with the rise in the pound proving short-lived and a concerted break below that level would open up the possibility of larger declines.
The pound bounced in the initial response to the data but has since come back under pressure and is once more testing the 1.2975-1.3000 support region. Source: XTB Macrobond
More soft data from the Eurozone
Despite a couple of bright spots, the overall picture from the latest batch of industry surveys across the Eurozone isn't pretty, and this has caused both the single currency and stock markets on the continent to come under pressure. The service PMIs from France and Germany both topped estimates, but the Eurozone wide figure was worse than expected and another disappointing manufacturing read from Germany will only serve to further heighten concerns of a global slowdown. Due to a downward revision to the prior month which was already at a 6-year low, the data for April actually represents a small recovery, but a reading of 44.5 is still very weak and now means that 10 of the past 12 releases for this metric have come in worse than expected - an ominous sign when German manufacturing is seen by many as a proxy for global growth.
The German Dax has shrugged off the soft data and actually trades higher since the release. 2019 highs of 12220 are a possible resistance level while 12110 potential support. Price possibly carving out right shoulder in S-H-S but still some way to go yet. Source: xStation
