The volume of British retail sales dropped by 1.5%. Expectations were low for this retail sales release. They were expected to drop by 0.9% for the month of January after an outstanding leap of 2.6% in December, which was now upgraded to 2.7%. Year over year, sales rose by 4.3%, less than 5% expected. Core sales also dropped by 1.5%, and y/y it stands at 4.8%, both also slightly below expectations. All major UK figures disappointed this week.
GBP/USD was trading around 1.6630, down after a run higher within the 1.6618 to 1.6668 range. Cable is now ticking back up. It seems that a bigger disappointment was front run. So far, the range is maintained.
Update: GBP/USD is now at the top of the range. The whisper figures were probably worse than reality.
Another figure that was released is the Public Sector Net Borrowing number for January, which dropped by 6.4 billion pounds. It was expected to be -9.3 billion. The negative figure reflects a surplus in government activity. In December, net borrowing was +10.4 billion (before revisions).
Important figures from the UK disappointed this week: inflation fell below target and reached 1.9%. In addition, the unemployment rate bumped up to 7.2%, after a few excellent months of drops. Lower prices and higher unemployment allow more breathing space for the Bank of England before raising the rates.
After hinting of rate hike in Q2 2015, a BOE member, Miles, chimed in and said that a rate hike can be expected in the spring of next year. This explicit mention strengthened the pound.
Support lies at 1.6618, and resistance at 1.6668. For more, see the GBPUSD forecast.
