Retail Activity Rises Despite Inflation
The British Pound has seen strong demand again today following an unexpectedly strong set of retail sales for April. The data, released this morning, showed that retail sales grew by 1.3% last month. This was in stark contrast to the -0.3% reading the market was expecting and marks a sharp reversal from the prior month’s -1.2% result.
Looking at the breakdown of the data, the rise was mainly driven by cigarettes and alcohol. Spending on this category was seen soaring over the month despite elevated inflation which has seen the cost of most goods rising sharply this year.
Earlie this week inflation was seen hitting 40-year highs in the UK last month. At 9%, inflation is currently 2% above wage growth. With huge labour shortages and higher prices putting upward pressure on inflation, this latest data shows that inflation is likely to continue rising near term as spending has yet to fall.
GBPUSD is currently rallying off the bear channel lows with price now back above the 1.2426 level. With both MACD and RSI turned bullish here, the focus is on further upside near-term with 1.2626 the next resistance for bulls to challenge, along with the bear channel top.