Summary:
- UK retail sales comes in below consensus forecasts
- GBP lower heading into the release but has seen a muted reaction since
- The UK100 has fallen to its lowest level in almost a month and may be on the verge of printing an important technical signal
The latest retail sales figures from the UK have come in below consensus forecast and in doing so has failed to provide a positive data point heading into the Bank of England rate decision. A month on month decline of 1.2% was a sharp contraction after the prior reading showed a 2.5% increase (revised higher from 2.3%) and means that now 4 of the past 6 releases for this metric have missed forecasts.
The reaction in the pound has been fairly muted so far with the currency remaining under pressure and seeing some selling pressure after drifting lower during the Asian session.
Looking ahead the Bank of England could be a market moving event for GBP at Midday. The rate is widely expected to be kept on hold but an keep eye on the number of dissenters to see if anyone else joins Forbes in calling for a rate hike.
Last time out the Bank of England released their inflation report on one of the four “super Thursday” events per annum but this time there will be just the rate decision and accompanying statement. With inflation measures continuing to rise with Tuesday seeing another move higher in UK CPI it will be interesting to see if there’s any mention of this in the statement and any reference to the bank’s tolerance to above target inflation.
The UK100 has gotten off to a bad start today with stocks in London lower by almost 1 percent. The index has been treading water in recent weeks after posting a record all time high of 7587. Repeated attempts in the past week to move back above 7543 have been met with selling pressure. Keep an eye on the 8 and 21 period EMAs which are converging. A bearish cross (8 moving below 21) has previously signaled several significant declines.
A bearish cross between the 8 and 21 period EMAs could occur in the coming sessions