Breaking: UK Retail Sales rise 0.6% MoM in July vs. 0.2% expected

Market reaction to the UK Retail Sales report

GBP/USD attracts some buyers in an immediate reaction to the UK data, trading 0.24% higher on the day at 1.3466 as of writing.

Pound Sterling Price Last 7 Days

The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.08%	0.36%	0.90%	0.39%	-0.13%	0.27%	0.37%
EUR	-0.08%		0.29%	0.81%	0.32%	-0.14%	0.19%	0.29%
GBP	-0.36%	-0.29%		0.50%	0.03%	-0.44%	-0.04%	0.00%
JPY	-0.90%	-0.81%	-0.50%		-0.46%	-1.04%	-0.62%	-0.45%
CAD	-0.39%	-0.32%	-0.03%	0.46%		-0.53%	-0.09%	-0.03%
AUD	0.13%	0.14%	0.44%	1.04%	0.53%		0.35%	0.44%
NZD	-0.27%	-0.19%	0.04%	0.62%	0.09%	-0.35%		0.10%
CHF	-0.37%	-0.29%	0.00%	0.45%	0.03%	-0.44%	-0.10%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

This section was published on September 5 at 04.03 GMT as a preview of the UK Retail Sales release.

The UK Retail Sales Overview

The UK Retail Sales, scheduled to be published later this session at 0600 GMT, are expected to have registered a growth of 0.2% in July, compared to a 0.9% increase seen in the previous month. On an annualized basis, Retail Sales are seen rising 1.3% during the reported month, down from 1.7% booked in June.

Meanwhile, core Retail Sales, stripping the basket of motor fuel sales, are anticipated to have climbed by 0.4% MoM and by 1.2% over the year, lower than 0.6% and 1.8%, respectively.

How could the UK Retail Sales affect GBP/USD?

A robust consumer spending, which generally supports the British Pound (GBP), could exert some pressure on the GBP/USD pair amid the lack of US Dollar (USD) buying interest. In contrast, the market reaction to a disappointing report is more likely to be limited as traders keenly await the release of the US Nonfarm Payrolls (NFP) report, due later during the North American session.

FXStreet's Lead Analyst, Eren Sengezer, noted, "1.3440-1.3460, where the 200-period SMA, Fibonacci 50% retracement of the latest downtrend and the 100-day SMA are located, remains intact as resistance. In case GBP/USD clears that hurdle, 1.3490-1.3500 (round level, 100-period SMA) could be seen as the next resistance level before 1.3535 (Fibonacci 61.8% retracement)."

"Looking south, support levels could be seen at 1.3390-1.3400 (Fibonacci 38.2% retracement, round level), 1.3330 (static level) and 1.3300 (Fibonacci 23.6% retracement),” Eren adds.

Key Notes

Pound Sterling finds support as UK gilt yields stretch lower

GBP/USD settles into holding pattern ahead of key US NFP jobs data

GBP is outperforming with modest gain – Scotiabank

About the UK Retail Sales

The Retail Sales data, released by the Office for National Statistics on a monthly basis, measures the volume of sales of goods by retailers in Great Britain directly to end customers. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the previous month. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Economic Indicator

Retail Sales (MoM)

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England’s monetary policy influence Sterling?

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.