February retail sales in the UK positively surprised markets. The final values strongly beat analysts’ forecasts, which resulted in a significant strengthening of the pound sterling. GBP/USD in first reaction gains over 40 pips, no problems with overcoming significant resistance at 1.2500.
BoE has reason for satisfaction
Retail Sales m/m was ranked at 1.4% (forecast 0.4%), while the y/y to 3.7% (forecast 2.6%). So strong results are another reason that will confirm Bank of England in belief that it is worth moving rhetoric of monetary policy on a much more neutral, if not hawkish ground. The first signal that we have seen was during the last PolMon meeting .
Very well were presented also baseline indicators. On a monthly basis + 1.3% (forecast + 0.4%), while compared to February last year, + 4.1% (analysts had expected growth of + 3.1%).
What is true for all of the above was made a downward revision of January results. On the one hand this is a problem, but we must remember that the beginning of the year has always been characterized by high volatility. Markets were focused on very good results of February, almost completely ignoring the correction results from the previous month.
1.2500 defeated?
Although to the end of Thursday’s session it’s still very far away, it is a strong movement for the GBP after the publication of 10:30 let with no problems to overcome 1.2500 resistance zone. The first feeble attempts cable undertook yesterday, but these ended under round ceiling. Today situation is different and there are many indications that we will soon come to test the trend line connecting the lower peaks from December 2016. About possibility of such bullish changes I already informed in the morning article.
If those resistance levels would be permanently broken then the GBP/USD has a chance to continue strong upward correction. Also EUR/GBP – shortly after the publication slides over 30 pips, clearly deepening minima of Thursday. The next support zone is located at 0.8590.
