Henry Liu
Former FPA Special Consultant
- Messages
- 473
Today’s Retail Sales number from UK will be widely watched as this is a high impact yet tradable report. Here is the forecast for this release:
4:30am (NY Time) Forecast 0.9% Previous 0.2%
ACTION: GBP/USD BUY 1.4% SELL 0.4%
The Trade Plan
The monthly retail sales report is a direct measurement of consumer activities at the retail level. A higher release is generally good for the economy, and better for it’s currency; a lower release is considered negative for the economy and not good for it’s currency.
Our tradable deviation or surprise factor for UK Retail Sales is 0.5% to BUY or SELL. If our deviation is hit, we can expect the market to move at least 50 pips within the hour, with a historical accuracy of 72%. We’ll be looking to BUY GBP/USD if we get a positive release at 1.4%, and SELL GBP/USD if we get 0.4% or worse.
We’ll be looking for an after-news retracement trade for this release. For more information on my trading methods:
Henry Liu's Trading Method
The Market
The MPC voted 6-3 to hold interest rates at 5% despite rising inflation. Yet, the forecast for retail sales is higher than last month. According to Bloomberg, retail sales rose 0.7% in the UK probably due to enjoyable weather and the Royal Wedding but consumer confidence is still weak. The MPC cited the primary reason for low consumer confidence. According to their experts, the indications are: an increased concentration in sales during pay days as well as shoppers making smaller and more frequent purchases while disregarding the purchase of discretionary items.
External inflationary pressures are greatly affecting recovery momentum. Increased oil and food costs are creating global concern that inhibit consumers spending. Critics of a rate hike believe that external pressures must ease before a rate hike can be affective. Subdued pay pressures, sluggish economic recovery, and untrusting consumer confidence should all keep inflation down once commodity prices decrease.
Additional Thoughts
GBP is possibly heading towards the 1.7000 level in the next few months, therefore it is already a “BUY ONLY” currency in my book. Any negative news will just mean that I’d buy in at a better price.
Pre-News Consideration
With inflationary pressure in UK on the rise, a better than expected Retail Sales could add to the momentum of the longer-term view on GBP uptrend, despite of the consolidation we saw during the last 24 hours. It is possible that traders may be expecting a better release…so I would be looking to BUY GBP/USD or GBP/JPY prior to the release.
With MPC vote still split at 3-0-6, market will probably not oversell GBP. If GBPUSD were to drop significantly, there will be bargain buyers.
Historical Chart and Data for UK Retail Sales m/m
Thanks,
4:30am (NY Time) Forecast 0.9% Previous 0.2%
ACTION: GBP/USD BUY 1.4% SELL 0.4%
The Trade Plan
The monthly retail sales report is a direct measurement of consumer activities at the retail level. A higher release is generally good for the economy, and better for it’s currency; a lower release is considered negative for the economy and not good for it’s currency.
Our tradable deviation or surprise factor for UK Retail Sales is 0.5% to BUY or SELL. If our deviation is hit, we can expect the market to move at least 50 pips within the hour, with a historical accuracy of 72%. We’ll be looking to BUY GBP/USD if we get a positive release at 1.4%, and SELL GBP/USD if we get 0.4% or worse.
We’ll be looking for an after-news retracement trade for this release. For more information on my trading methods:
Henry Liu's Trading Method
The Market
The MPC voted 6-3 to hold interest rates at 5% despite rising inflation. Yet, the forecast for retail sales is higher than last month. According to Bloomberg, retail sales rose 0.7% in the UK probably due to enjoyable weather and the Royal Wedding but consumer confidence is still weak. The MPC cited the primary reason for low consumer confidence. According to their experts, the indications are: an increased concentration in sales during pay days as well as shoppers making smaller and more frequent purchases while disregarding the purchase of discretionary items.
External inflationary pressures are greatly affecting recovery momentum. Increased oil and food costs are creating global concern that inhibit consumers spending. Critics of a rate hike believe that external pressures must ease before a rate hike can be affective. Subdued pay pressures, sluggish economic recovery, and untrusting consumer confidence should all keep inflation down once commodity prices decrease.
Additional Thoughts
GBP is possibly heading towards the 1.7000 level in the next few months, therefore it is already a “BUY ONLY” currency in my book. Any negative news will just mean that I’d buy in at a better price.
Pre-News Consideration
With inflationary pressure in UK on the rise, a better than expected Retail Sales could add to the momentum of the longer-term view on GBP uptrend, despite of the consolidation we saw during the last 24 hours. It is possible that traders may be expecting a better release…so I would be looking to BUY GBP/USD or GBP/JPY prior to the release.
With MPC vote still split at 3-0-6, market will probably not oversell GBP. If GBPUSD were to drop significantly, there will be bargain buyers.
Historical Chart and Data for UK Retail Sales m/m
Thanks,
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