Brits are buying once again. Is this an Easter effect? Or good weather? Perhaps, but this doesn’t matter now. Month over month, retail sales are up 2.3%, much better than expected. Year over year, the volume is up 4%. Excluding fuel, the rise is 2% m/m and 4.5% y/y. All the figures are above expectations and come on top of small upwards revisions.
GBP/USD likes the data and breaks above 1.30. The high so far is 1.3030. These are the highest levels since October. Further resistance awaits at 1.3050, followed by 1.3130. We are back to the range seen after the Brexit vote and before the flash crash.
Here is how the rise looks on the daily chart:
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The UK was expected to report a rise of 1% in the volume of retail sales in April 2017. This follows a disappointing drop of 1.8% back in March. Year over year, an advance of 2.1% was projected to follow an increase of 1.7% seen beforehand. Excluding fuel, a monthly expansion of 1.1% was forecast and 2.5% was the y/y prediction.
GBP/UDS traded around 1.2980, rising within the recent range.The pound did not capitalize on the Comey memo that hit the greenback. It maintained the stability when the greenback recovered on the appointment of the special counsel.
Here are the recent moves on the pound/dollar chart, and some background information follows.
Falling standards of living
Earlier this week, we learned that real wages are falling in the UK. Inflation came out at 2.7% y/y, above expectations. Nominal wages are up 2.4% but only 2.1% excluding bonuses. So while Brits are enjoying a rock-bottom unemployment rate of 2.6%, their salaries are not keeping up with inflation.
The heating up of inflation is due to Brexit: the value of the pound fell sharply, making imports more expensive. Previous retail sales reports have shown that Brits are buying more essentials such as food and energy and fewer non-essentials.
