UK Retail Sales Surge in January, Reversing December Slump; GBP Steady
The latest data reveals that UK retail sales experienced a remarkable 3.4% increase in January, bouncing back from December's unexpected 3.3% decline.
NEWS
2/18/20242 min read
UK Retail Sales Surge in January, Reversing December Slump; GBP Steady
The latest data reveals that UK retail sales experienced a remarkable 3.4% increase in January, bouncing back from December's unexpected 3.3% decline. Analysts attribute December's poor performance to a shift in consumer behavior, with many opting to purchase Christmas gifts during the Black Friday sales in November. Additionally, concerns about the cost of living led nearly half of surveyed respondents to plan on spending less during the holiday season.
This positive development comes shortly after the UK economy officially entered a recession in the final quarter of 2023. Despite this, other economic indicators such as inflation and labor market resilience have remained steady, likely tempering expectations for rate cuts by the Bank of England officials. For real-time economic data, explore our DailyFX economic calendar.
However, consumers ended up paying more for their purchases, as the 'value' statistic, reflecting the price aspect of sold items, outpaced the volume component with a 3.9% increase compared to 3.4% for volume.
Immediate Market Reaction of GBP/USD
Following the release of the retail sales data, the pound initially responded positively but later retraced towards pre-announcement levels. This week has seen the pound facing some downward pressure against the dollar as the currency pair attempts to break below its recent trading range.
Looking at the daily chart, previous attempts to break out of this range have been unsuccessful due to insufficient momentum and support around the 200-day simple moving average. The lower boundary of the horizontal trading range, which has previously acted as support, may now serve as resistance as downward momentum increases, as indicated by the MACD indicator.
Later today, market participants will be closely monitoring US PPI data and remarks from key Federal Reserve members Michael Barr and Mary Daly. Additionally, the University of Michigan's preliminary consumer sentiment report for February will provide insights into inflation expectations and overall sentiment trends.
GBP/USD Daily Chart