Thursday, April 20, 2017

U.K.’s retail sales report will be released (March)

The retail sales report is important to forex traders and decision makers alike because it is the primary gauge for the level of consumer spending in the U.K. economy. And consumer spending, in turn, has been the backbone of the British economy, as well as one of the main drivers for domestic inflation.
Moreover, the minutes of the March MPC meeting revealed that “some members noted that it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted.” The retail sales report is also therefore linked to BOE rate hike expectations.

What happened last time?

  • Headline retail sales m/m: 1.4% vs. 0.4% expected, -0.5% previous
  • Headline retail sales y/y: 3.7% vs. 2.6% expected, 1.0% previous
  • Core retail sales m/m: 1.3% vs. 0.4% expected, -0.3% previous
  • Core retail sales y/y: 4.1% vs. 3.1% expected, 2.1% previous
The retail sales report for the February period was actually pretty good, since the headline reading for retail sales volume surged by 1.4% month-on-month, easily exceeding the +0.4% consensus.
Even better, the surge in February is the first positive reading after three straight months of negative monthly readings. Not only that, all store types also reported higher sales volume.
Year-on-year, retail sales jumped by 3.7%, easily beating the +2.6% consensus, as well as the previous month’s 1.0% increase. In addition, the faster increase in February puts an end to the four months of ever weaker year-on-year increases for both the headline and core readings.
However, not all store types reported better sales volume, since household goods stores reported a 1.9% decrease in sales while fuel stations printed a 0.1% decrease in sales volume. Overall, still pretty good, though.
And since the U.K.’s retail sales report was net positive, pound bulls reacted by buying up the pound across the board.