U.K. retail sales are expected to fall for a second month as a slowing economy, rising inflation and a weakening labor market have weighed on consumers.
Fundamental Outlook
U.K. retail sales are expected to fall for a second month as a slowing economy, rising inflation and a weakening labor market have weighed on consumers. The 0.2% decline that is expected is following June's record 3.9% fall which could add to the current Sterling weakness. Technicals are calling for another leg lower for the pound. Yet, the minutes from the BoE's last meeting revealed that the central bank is concerned enough about inflation, which has been above its 3% threshold for the past three months, that a rate cut is unlikely by the end of the year. Although this could generate some pound support, consecutive months of at least 20,000 jobless claims could see consumer consumption decline more than expected, supporting the technical call for a short GBPUSD position.
Technical Outlook
Until 1.8786 is broken, the GBPUSD is vulnerable to a new low (below 1.8512). The sideways trading over the past few days takes the form of a triangle. Triangles occur quite often as 4th waves and lead to terminal thrusts in wave 5 - followed by a reversal.
For More Technical Analysis Visit the Daily Technical Report
