DailyFX.com -
- U.K. Retail Sales to Contract for First Time Since December.
- Will Slower Consumption Encourage the BoE to Further Delay Normalizing Monetary Policy?
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Trading the News: U.K. Retail Sales
The U.K. Retail Sales report may produce headwinds for the British Pound and drag on GBP/USD as signs of a slowing recovery provides the Bank of England (BoE) with greater scope to further delay its normalization cycle.
What’s Expected:
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Why Is This Event Important:
Even though BoE argues that the next policy move will be to lift the benchmark interest rate off of the record-low, the Monetary Policy Committee (MPC) may preserve its current policy throughout 2016 in an effort to mitigate the downside risks surrounding the real economy.
Expectations: Bearish Argument/Scenario
| Release | Expected | Actual |
| CBI Trends Total Orders (MAR) | -14 | -14 |
| NIESR GDP Estimate (FEB) | -- | 0.3% |
| GfK Consumer Confidence (FEB) | 3 | 0 |
The recent weakness in household sentiment accompanied by the slowdown in economic activity may drag on private-sector consumption, and a dismal sales report may spur a bearish reaction in GBP/USD as market participants push out bets for a BoE rate-hike.
Risk: Bullish Argument/Scenario
| Release | Expected | Actual |
| Jobless Claims Change (FEB) | -9.1K | -18.0K |
| Average Hourly Earnings ex. Bonus (3MoY) (JAN) | 2.1% | 2.2% |
| Net Consumer Credit (JAN) | 1.4B | 1.6B |
Nevertheless, the expansion in private-sector lending paired with the ongoing improvement in labor-market dynamics may boost household spending, and a positive development may generate a near-term rebound in GBP/USD as it puts pressure on Governor Mark Carney and Co. to normalize monetary policy sooner rather than later.
How To Trade This Event Risk(Video)
Bearish GBP Trade: Retail Sales Slips 1.0% or Greater
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Need red, five-minute candle following the GDP report to consider a short British Pound trade.
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If market reaction favors bearish sterling trade, short GBP/USD with two separate position.
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Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
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Move stop to entry on remaining position once initial target is hit, set reasonable limit.
Bullish GBP Trade: U.K. Consumption Beats Market Expectations
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Need green, five-minute candle to favor a long GBP/USD trade.
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Implement same setup as the bearish British Pound trade, just in reverse.
Potential Price Targets For The Release
GBPUSD Daily