The UK retail sales are expected to inch higher in July after unexpectedly dropping by -0.5% in June. UK retail sales are expected to grow by 0.2% over the month, while the annualized rate is expected to tick higher to 3.0% versus 2.9% at the previous reading. Economists also expect that sales excluding automotive fuel gain by 0.1%, compared to a -0.6% drop in June.
Today’s retail sales figures follow CPI inflation data released yesterday that indicated some inflationary pressures in the UK economy. The UK rate of consumer price inflation accelerated to 2.5% for the first time in the last eight months.
Current data suggest that the BOE was right to hike interest rates to 0.75%, for the second time in less than 12 months. However, since the risks of a hard-Brexit are still there, the BOE will remain cautious. Only when Brexit fears fade (with a deal agreeable to multiple parties) will the BOE be more relaxed and pick up the pace of interest rate hikes.
Bank of England policymaker Ian McCafferty, has suggested that as wage growth may hit 4% sometime next year, the BOE would be forced to hike at least two more times in the next 18 months. The UK retail sales data has the potential to be the fuel that Sterling needs to produce a relief rally.
Source: LCG MT4, 16/8/18However, the technical pattern still remains heavily bearish as long as Sterling trades below the big psychological number 1.3000 against the US dollar. The dollar does look stretched but any larger recovery in the pound has the preceding 2017 price range to burn through.
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