The British pound has edged lower on Friday. In the European session, GBP/USD is trading at 1.2578, down 0.17%.
UK retail sales rebound with 3.4% gain
UK retail sales were more than impressive, surging 3.4% m/m in January. This crushed the market estimate of 1.5% and followed a 3.3% decline in December. The reading was the largest monthly gain since April 2021. The sharp gain was driven by increased sales of food and fuel. On an annualized basis, retail sales rebounded with a 0.7% gain, compared to a 2.4% decline in December and well above the market estimate of -1.4%.
Will the real UK economy please stand up?
Traders can be forgiven for scratching their head after the latest retail sales report, which points to consumers spending with gusto. Just a day earlier, the markets were digesting the news that the UK economy had entered a recession late in 2024, after recording back-to-back quarters of negative growth. GDP fell 0.3% in the fourth quarter and 0.1% in the third quarter. What gives?
The answer could well be that the UK economy, although hurting, may be turning a corner. The sharp rise in interest rates has cooled down the economy and lowered inflation dramatically, but this effect appears to be fading fast. The “R” word (recession) may be making headlines but it is a shallow recession and the economy could quickly return to growth mode with some decent economic data.
The Bank of England meets on March 21th and will try to make sense of where the UK economy is headed. The BoE has kept rates unchanged since August and there is pressure on the central bank to provide some relief to households and businesses and lower rates. At the same time, inflation remains sticky and the BoE is determined to stamp out high inflation and bring it closer to the 2% target before it lowers rates.
GBP/USD Technical
- GBP/USD is testing support at 1.2597. Below, there is support at 1.2550
- There is resistance at 1.2676 and 1.2723
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at [email protected]. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.
Read the full article here
