UK retail sales preview: What to expect of GBP/USD?

The British currency extends its retreat from two-week highs and now drops further below 1.46 handle on the back of a correction, after three consecutive sessions of gains seen in the cable. The GBP/USD pair extended north, despite hawkish Fed minutes, as the bulls rode higher on the back growing support for the Remain camp, a latest Brexit poll showed.

Looking ahead, markets now turns focus on the UK retail sales data lined up for release later this session at 08.30GMT, for further insights on the UK economic prospects.

UK retail sales ex-auto likely to rebound in April

Total retail sales volumes are seen rebounding 0.6% in April from a decline of 1.3% seen in March. Retail stripped of fuel sales is expected to have picked up 0.6% from a fall of 1.6% in March.

It may not be surprising if the actual figure may surprise to the downside as the lead indicator – British Retail Consortium (BRC) sales figure released earlier this month revealed that the British retailers suffered the sharpest drop in sales for eight months in April on the back of climatic reasons. The BRC said like-for-like sales fell 0.9% in April on a year earlier, the biggest drop since last August.

A weaker BRC print points that markets are pricing-in the retail sales to come in weaker in the reported month, and therefore, markets continue selling the GBP across the board.

Analysts at Societe Generale noted, “The official retail sales ex autos are expected to have grown 0.5% m/m in April. Reports sales fell from 7 to -13 but sales for the time of year only moved from 1 to 0. Taking all the evidence into account, we predict a modest bounce in sales of 0.3% mom.”

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet notes, “Earlier during the week, the tested 50 & 100-day SMAs confluence region and rebounded sharply, suggesting resumption of the pair’s near-term upward trajectory. From current levels 1.4550-40 resistance break level (23.6% Fibonacci retracement level) now seems to protect immediate downside. Any further selling pressure below this immediate support might now be limited just below 1.4500 handle, near 1.4490-85 horizontal support.”

“Meanwhile on the upside, momentum back above 1.4600 handle is likely to get extended further towards early May daily closing highs resistance near 1.4670. A decisive close above 2016 highs would open room for the next up-side target of 1.4800 round figure mark.”