GBPUSD wavers as devastating retail sales suggest economy is bottoming
The GBPUSD pair declined slightly after the ONS released weak retail sales numbers. As of 07:23 GMT, the pair is trading at 1.2200, which is lower than yesterday’s high of 1.2260.
GBPUSD reacts to UK retail sales
Data released by the Office of National Statistics (ONS) showed that retail sales dropped by 18.1% in April following a 5.2% decline in March. Analysts polled by Refinitiv were expecting the sales to fall by 16%. The sales fell by 22.6% year on year.
The core retail sales, which exclude the volatile food and energy prices, declined by 15.2% in April after falling by 3.8% in March. The core retail sales fell by 18.4% year on year.
According to the ONS, all sectors except non-store retailing contributed to the decline. He biggest decline was clothing, whose volume declined by 50.2%. The sales had fallen by 34.9% in March. That decline is mostly because most people were staying at home and had no use for new clothes.
Meanwhile, more people turned to online shopping during the lockdown. The portion of online sales rose by 30.7% after rising by 19.1% in April last year. The GBPUSD pair has been on edge, with most traders in the futures market betting against it.
The weak retail sales data came a day after Markit released encouraging manufacturing and services PMI data. Manufacturing PMI rose to 40.6 while the services PMI doubled from the previous 13.4 to 27.8. These numbers show that the UK economy may have bottomed as more people start to go back to work.
The GBPUSD pair is trading at the 38.2% Fibonacci retracement level on the daily chart. The pair is also below the 100-day and 50-day EMA. Also, it is below the double top level of 1.2638, which was formed on April 15 and April 30. Therefore, the bearish trend will continue so long as the pair remains below the 38.2% Fib level of 1.2220.
On the flip side, a move above 1.2460 will invalidate this prediction. This price is at the intersection of the 50% retracement and the 50-day EMA.