- UK retail sales -0.9% in Setember (-0.3% expected)
- UK Gfk consumer confidence -30 in October (-20 expected)
- GBPUSD losing momentum near recent lows
UK consumers are reining in spending in the run-up to the festive season and the latest survey from Gfk suggests it’s not just the weather that’s driving it.
Retail sales fell 0.9% in September, far exceeding expectations of a 0.3% decline as unseasonably warm weather weighed on sales of Autumn clothing. While that’s not a new phenomenon, weather is often referenced in these reports, it also comes at a time when the cost of living pressures are being felt even though wages are now outpacing inflation.
Whether it is higher prices at the pump or supermarket, larger energy bills, or big increases in mortgages and rents, households are feeling the pressure and that’s not just being reflected in sales but surveys too.
The Gfk consumer confidence slipped back to -30 again and cost-of-living pressures were cited as a reason for that. While there is a view that decelerating inflation – which Governor Bailey indicated will fall sharply in October – could support consumer spending, I’m less convinced after such a long period of falling real wages and continued pressures from higher interest rates.
A double bottom forming?
The recovery earlier this month didn’t last long, with the price running into resistance around 1.2350, just shy of the 200/233-day simple moving average band.
Source – OANDA on Trading View
It’s now facing an interesting test of support as another rebound around these levels could potentially set up a double bottom following a substantial decline over the last few months.
The pair appears to be struggling to generate fresh momentum near the lows even as the dollar remains supported by higher US yields and the pound was briefly hit by the softer spending data. Another bounce may draw focus back to last weeks highs around 1.2337 which may represent the neckline of that double bottom.
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