THE TAKEAWAY: Retail sales decline 0.7% in March -> Cold weather hurt non-food sales -> Pound declines to a 13-day low

UK retail sales returned to decline in March and drove the Pound to a 13-day low against the US Dollar. Retail sales (including auto fuel) fell 0.7% over the month, disappointing expectations for sales to only drop 0.6% and a reversal from February’s 2.1% rise in retail sales. Retail sales fell 0.5% from March 2012.

Over the first quarter of the year, retail sales have risen 0.4% when compared to the fourth quarter of 2012. The non-food sector retail sales fell 2.6% from March 2012, which may be explained by the fact that March 2013 was the second coldest March on record.

The UK economy declined 0.3% in Q4 and is now only one quarter away from a technical tripled dip recession. Markit said that its March PMI’s indicated a 0.1% growth in first quarter GDP, as the services sector activity outweighed downturns in construction and manufacturing. The predicted GDP growth is supported by the quarter over quarter increase in retail sales. Signs of economic expansion are Pound positive.

That’s why the disappointing retail sales sent the Pound about twenty points lower to a 13-day low of 1.5215 against the US Dollar; however most of the decline was soon unwound in Forex trading. GBP/USD may see support by a broken resistance line around 1.5200, while resistance may continue to be provided by 1.5250.

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GBPUSDDaily: April 18, 2013

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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