- U.K. Retail Sales to Rebound 0.4% in September
- 0.9% Decline in August Marked the Largest Decline in 2013
Trading the News: U.K. Retail Sales
U.K. Retail Sales are expected to increase 0.4% in September, and a marked rebound in private sector consumption should heighten the appeal of the British Pound as it raises the scope for a stronger recovery in Britain.
What’s Expected:
Time of release: 10/16/2013 8:30 GMT, 4:30 EDT
Primary Pair Impact: GBPUSD
Expected: 0.4%
Previous: -0.9%
DailyFX Forecast: -0.2% to 0.5%
Why Is This Event Important:
A pickup in household spending may encourage the Bank of England (BoE) to adopt a more hawkish tone for monetary policy, and the central bank may show a greater willingness to implement its exit strategy ahead of schedule in an effort to achieve the 2% target for inflation.
Expectations: Bullish Argument/Scenario
The ongoing improvement in the labor market along with the expansion in consumer credit may prompt a better-than-expected sales report, and we may see the BoE take a more stern approach in achieve the inflation target as sticky price growth continues to sap purchasing power for U.K. households.
Risk: Bearish Argument/Scenario
However, subdued wage growth paired with sticky inflation may spark a further decline in consumer spending, and the Monetary Policy Committee may keep the door open to expand the balance sheet further in an effort to encourage a stronger recovery.
How To Trade This Event Risk(Video)
Bullish GBP Trade: Retail Sales Climbs 0.4% or Greater
Need green, five-minute candle following the release to consider a bullish GBPUSD trade
If reaction favors a buy trade, long British Pound with two separate position
Set stop at the near-by swing low/reasonable distance from cost; look for at least 1:1 risk-to-reward
Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bearish GBP Trade: Household Spending Contracts for Second Month
Need red, five-minute candle to look at a short GBPUSD trade
Implement same setup as the bullish British Pound trade, just in reverse
Potential Price Targets For The Release
GBPUSD Daily
Chart – Created Using FXCM Marketscope 2.0
Close Above 1.5900-10 (78.6% expansion) Offers Constructive View
Relative Strength Index Holds 50 Mark Following Bullish Break
Interim Resistance: 1.6300 Pivot (2012 highs)
Interim Support: 1.5900-10 (78.6% Fibonacci expansion)
Impact that the U.K. Retail Sales report has had on GBP during the last month
August 2013 U.K. Retail Sales
Retail spending in the U.K. unexpectedly slipped 0.9% in September following a 1.2% rise the month prior, which was largely driven by a 1.6% decline in Household Goods Stores sales. The dismal print triggered a selloff in the British Pound, with the GBPUSD slipping below the 1.6100 handle, and the sterling weakened further throughout the North American trade as the pair closed at 1.6029.
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com
Follow me on Twitter at @DavidJSong
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