GBP/USD: Trading the British Retail Sales Nov 2014

British Retail Sales is considered one of the most important indicators of consumer spending. A reading that is higher than the market forecast is bullish for the British pound.

Update: UK retail sales jump 0.8% – GBP/USD follows

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Friday at 9:30 GMT.

 Indicator Background

Consumer spending is one of the most important components of the economy, and strong retail sales numbers signify growth and a stronger economy.

Retail Sales bounced back last month, posting a decline of 0.3%, missing the estimate of -0.1%. This marked a 4-month low for the key indicator.  The markets are expecting a strong turnaround in the upcoming reading, with a forecast of 0.4%. Will the indicator meet or beat the estimate?

Sentiments and levels

US numbers remain strong, led by solid consumer spending and confidence numbers. The UK economy has been unable to keep pace, and the pound has paid the price, trading at low levels. Inflation has not improved and last week the BOE cut its inflation forecast. This mean the BoE could delay an interest rate hike. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6006, 1.5909, 1.5746, 1.5625, 1.5539 and 1.5290.

5 Scenarios

1. Within expectations: 0.1% to 0.7%: In such a case, the pound is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.8% to 1.2%: An unexpected higher reading can send GBP/USD above one resistance line.
3. Well above expectations: Above 1.2%: Such an outcome would propel the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.3% to 0.0%: A reading at zero or in negative territory could push GBP/USD below one level of support.
5. Well below expectations: Below -0.3%: In this scenario, the pound could take a hit and break a second support level.

For more about the pound, see the GBP/USD.

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