UK February retail sales smashed expectations, rising 1.7% m/m and by 3.7%, up on the respective median forecasts for 0.4% and 2.6% growth. A rebound had been expected following two consecutive months of sub-par sales, though the magnitude was even greater than foreseen. January data were revised lower, however, to -0.5% m/m from -0.3% m/m initially reported, and to 1.0% y/y growth from 1.5% y/y. The online sales component of the report rose 20.7% y/y. The ONS stats office advices caution, highlighting that the underlying three-month view shows sale in decline because of the weakness in December and January.
GBPUSD has stormed higher in the wake of the Retail Sales data, making new week high above 1.2500. However, it seems that Brexit concerns have not taken away, with Article 50 to be triggered next week, and hence cable to present a strong resistance at 1.2500. Even though cable has extended post UK data rally earlier, making month highs at 1.2530, the failure of closing above that significant point as presented in the 4-hour chart, indicates a weakness of the pair within the day. Interestingly, GBPUSD in the 1-hour chart founds support at the 30 period MA since yesterday at 1.2472, which is also the confluence of the 61.8 Fibonacci level. Therefore, based on Fibonacci levels in 1-hour and 4 hour charts, cable is likely to move from now onward lower to the 1.2450-1.2470 area.
Nevertheless, focus today will fall on the House of Reps vote on the repeal of Obamacare, which is looking a close call. A loss of a such a big-ticket item, with a Republican majority, would sow seeds of doubt about the Trump administration’s ability to push through with tax cuts and deregulation, which in turn would pressure global stock markets. The vote this presents polarized risks to market direction today.
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