UK retail sales soar in January
Following a disastrous December, UK retail sales rebounded dramatically in January, with volumes rising more than 3%.
These numbers today come after an extremely disappointing December in which retail sales fell by more than 3%. Economists had forecast retail sales to be just 1.2% up in January.
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The UK economy
The UK economy has recently entered a rough patch, experiencing a recession in the last two quarters of 2020. However, retail sales numbers tell a different story. In January, sales shot up by an impressive 3.2% compared to the previous month, surpassing the predicted 1.5% increase. This follows a record-breaking surge in December that was the highest monthly increase since the pandemic hit in 2021. Despite the recession, these strong retail sales figures point to a promising start for the London markets.
GBP/USD
When we take a look at the five-minute chart of the GBP/USD, we notice a significant jump in the pound's value once the retail sales numbers were released. This upward trend suggests a positive response from the market. However, when we examine the daily chart, we see that the pound's value seems to be stuck at low levels. There's even a chance that the support level of 1.2518 might be broken soon, which could lead to further declines. If this happens, we could be witnessing a topping pattern and potentially see the pound drop to 1.22, a level not seen since December of last year.
In conclusion, while the UK economy is officially in recession, the retail sales numbers paint a more optimistic picture. The substantial increase in January indicates a strong start for the London markets. However, the value of the pound remains uncertain. Although there has been a temporary rise, the currency's long-term trend remains stagnant, and there is a possibility of further declines if the support level is breached.
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