From the FXWW Chatroom: UK retail sales ex auto fuel in July were much stronger than expected at 1.5% vs 0.3% expectations and -0.9% last month. GBPUSD rallies roughly 80 pips in response to the data, now at 1.3150, as the data clearly shrugged off any Brexit effects.
Citi Economics comments: “This was a significant upside surprise and more than unwinds the drop we had in June. The prospect of a sizeable drop in UK GDP in Q3 in response to Brexit is not as prevalent as consensus would have it.” However it notes, “We wouldn’t read too much into these numbers initially, as part of the rise is likely due to seasonality which would eventually correct (exceptionally warm weather and tourism). Nevertheless this is water under the bridge – and limits further action from the BoE MPC for now.”
Next level? Our spot trader says watch 1.3175 (both previous lows and Fibo retracement off the August sell off).
Remember, CitiFX G10 Strategist Josh O’Byrne reasoned earlier, “With the USD trading poorly and some way until the November inflation report, good numbers are probably going to shake the bearish consensus. We would argue the short case wouldn’t be fundamentally different but our horizon may be a bit longer than the summer market’s.
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