GBP/USD: Trading the U.K. Retail Sales Report

Household spending in the U.K. is expected to rebound in the second-half of the year, with economists forecasting retail sales to rise 0.3% in June, and speculation for an economic recovery later this year could drive the British pound higher as growth prospects improve.
Trading the News: U.K. Retail Sales
What’s Expected
Time of release: 07/23/2009 09:30 GMT, 04:30 EST
Primary Pair Impact : GBPUSD
Expected: 0.3%
Previous: -0.6%
Effect the U.K. Retail Sales report had over GBPUSD for the past 2 months
May 2008 U.K. Retail Sales
Consumer spending in the U.K. unexpectedly slipped 0.6% in May, with the annual rate of consumption falling 1.6% from the previous year, and the data reinforces a dour outlook for growth and inflation as households face a weakening labor market paired with fears of a protracted downturn. A deeper look at the report showed discretionary spending on clothing and footwear slumped 1.9% from April, with sales at non-specialized stores falling 1.8%, while spending on household goods advanced 1.6% during the month. Meanwhile, the Bank of England continued to see a risk of a slower recovery as credit conditions remain far from normal, with Governor Mervyn King stating that ‘banks’ ability to finance a sustainable recovery remains impaired by low levels of equity capital.’ The comment suggests that the BoE may expand its asset purchase program in the months ahead in an effort to shore up the ailing economy.
April 2008 U.K. Retail Sales
Retail sales in the U.K. jumped 0.9% in April, topping forecasts for a 0.5% rise, and the data encourages an improved outlook for future growth as the government takes unprecedented steps to shore up the economy. The breakdown of the report showed sales at non-specialized stores increased 3.5% from March, with demands for household goods rising 0.2%, while discretionary spending on clothing and footwear slowed to 0.3% from 0.9% in the previous month. At the same time, BoE Governor King said that he expects a ‘slow and protracted’ recovery as the region faces its worst recession in over half a century, and went onto say that ‘inflation is more likely to be below the target than above.’ The dovish outlook held by the board suggests that the MPC may expand its asset purchase program in order to jump-start the economy, and is likely to hold the key rate the record-low for some time as growth and inflation falter.
What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement: