The GBP/USD pair has extended its losses below the 1.2700 level early Friday, following a larger-than-anticipated decline in UK Retail Sales data for April. The pair remains on a corrective slide from recent two-month highs of 1.2761, driven by renewed demand for the US Dollar. Key market indicators and events have compounded the downward pressure on the British Pound, making the trading landscape more complex for forex traders and financial analysts.
GBP/USD 4-hour Chart
Market Reaction to UK Retail Sales
The latest UK Retail Sales figures have had a pronounced impact on the GBP/USD pair. Sales volumes fell by 2.3% in April 2024, a significant drop following a revised fall of 0.2% in March 2024. The unexpected decline has heightened market concerns, causing the GBP/USD to edge lower after printing a ‘shooting star’ on Wednesday—a technical indicator typically viewed as a prelude to lower prices.
Today’s price action saw a jump toward a high of 1.2750, but it failed to breach the current week’s high of 1.2761, which opened the door for further losses.
Sector-Specific Performance
Sales volumes declined across most retail sectors in April 2024, with clothing retailers, sports equipment, games and toys stores, and furniture stores experiencing notable downturns. The poor weather conditions have been cited as a major factor reducing footfall and impacting sales.
Over a broader timeline, sales volumes rose by 0.7% in the three months leading to April 2024 when compared with the previous three months, following a weak December 2023. However, sales volumes were down by 0.8% compared to the same three-month period in 2023, highlighting ongoing challenges in the retail sector.
Yearly and Monthly Trends
On an annual basis, retail sales volumes fell by 2.7% in the year to April 2024 and are 3.8% below their pre-pandemic levels in February 2020. These figures indicate a sustained period of weak consumer spending, adding to the bearish sentiment around the GBP.
Non-food stores saw a significant reduction in sales volumes, falling by 4.1% in April 2024. This marks the joint-largest monthly fall (shared with December 2023) since January 2021. Retailers in this category attributed the declines to poor weather and consequently low customer footfall.
Online Spending Trends
Online spending values also showed declines, falling by 1.2% in April 2024 and by 1.5% over the year. Despite this, the proportion of sales made online increased from 26.2% in March 2024 to 26.5% in April 2024, as total in-store spending saw a greater reduction.
Implications for Forex Traders
The renewed selling pressure on GBP/USD below 1.2700 signals heightened volatility and potential trading opportunities for forex traders. The disappointing UK Retail Sales data has cast a spotlight on the broader economic challenges facing the UK, reinforcing the need for traders to stay informed about economic indicators that could influence currency movements.
The recent UK Retail Sales data has accentuated the downtrend in GBP/USD, offering critical insights for forex traders and financial analysts navigating this fluctuating market landscape.
Upcoming US Economic Data
Core Durable Goods Orders m/m
Later in the day, the US Core Durable Goods Orders m/m will be released. This metric measures the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items. Durable goods are defined as those with a lifespan of three years or more, such as machinery, vehicles, and appliances.
A higher-than-expected reading suggests increased manufacturing activity and economic health, which can strengthen the US Dollar. Conversely, a lower reading can weaken the Dollar.
US Revised UoM Consumer Sentiment
The US Revised University of Michigan (UoM) Consumer Sentiment index will also be released. This index measures the relative level of consumer confidence in economic activity, based on surveys of consumers’ views on financial conditions and future expectations. A higher-than-expected reading indicates stronger consumer confidence, which is generally positive for the Dollar. A weaker reading can have the opposite effect.
Market Impact and Trader Sentiment
The combination of disappointing UK Retail Sales data and upcoming US economic data releases has made traders cautious. With the GBP/USD pair struggling to maintain levels above 1.2700, traders will be keenly watching the release of the US Core Durable Goods Orders and the US Revised UoM Consumer Sentiment for further cues on market direction.
Forex traders and financial analysts should remain vigilant, as these data points could provide significant volatility opportunities in the forex market today.
Disclaimer:
All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.
