How To Play the U.K. Retail Sales Report

Before you end the week and paint the town red with your new suede dancing shoes, whatcha say to makin’ a handful of pips? Get dibs on the U.K.’s January retail sales report yo!

It seems that analysts are giddier than Pip Diddy was when he found out that Mick Jagger’s death was nothing but a Twitter hoax. They’ve predicted that consumer spending picked up in January by 0.6% after printing a record-low of -0.8% in December.

Economic gurus expect the British to have gone back to their shopaholic ways since weather in the U.K. improved during the month compared to December.

Does this mean that we’ll see more chaps flooding the Oxford Street or Meadowhall Shopping Centre in the near future?

Well, not necessarily. While retail sales figures most likely got a breather in January, a few naysayers don’t think that consumers have forgotten their bad vibes over the U.K.’s economy.

For one, the economy’s labor market figures remain weak, with jobless claims recently publishing an additional 2,400 claimants against expectations of a 3,000 decrease. How could consumers afford to buy Will and Kate wedding memorabilia if they’re not even sure of their paychecks?

Moreover, while inflation is on the rise, let me point out that rising commodity prices, and NOT consumer demand, is currently lifting pushing prices higher. The latest CPI report showed inflation to be at 3.7%, which is well above the Bank of England‘s 2.0% target. Since the public is already feeling the heat of higher taxes and steep budget cuts, consumers will most likely have difficulty mustering optimism, especially if the BOE continues to play the waiting game with the economy’s ballooning inflation.

So, I’m a little skeptical about whether or not retail spending bounced back last month. But let me you in on a little secret – it doesn’t really matter whether we think the results will be positive or negative! Why? Cause we can make some pips either way!

In the past, the U.K retail sales report has been a great opportunity for those who love to trade the news, as it normally leads to a spike in volatility.

Take a look at what happened last month:

GBP/USD Chart

As I said, the report came in much weaker than the -0.2% forecast, printing at -0.8%. The result? Another round of pound selling! GBP/USD fell almost 150 pips right after the news hit the airwaves. 150 pips! That could have been your trade of the month!

Take note though, that the sentiment was short lived. GBP/USD recovered over the next couple of days, and steadily traded up the charts. Could this have been a sign that traders are cautious to bring the pound much lower? Perhaps inflation concerns are really weighing on the minds of the big boys, which may be a reason why sentiment towards the pound has been up in recent weeks.

With that in mind, here are a couple of strategies you could take depending on the results of the retail sales report:

  • If retail sales come in much worse than expected, you could go short on a strong break lower. Just keep in mind that pound sentiment appears to be bullish, so take your profits when you can.
  • If the report prints a lot better than anticipated, one could take a long setup above recent highs and hold on a little longer, seeing as how the pound has been rallying since early this year.

In any case, make sure you brush up on your trading the news technique. If you’re already sweating and can’t take the heat, there’s no shame in sitting out and watching from the sidelines!


  • Darkdoji

    Hey Pips made lots of money this week – after I stopped reading all analysis and just stuck with the Dow theory (+ using my head) – the price will tell you, ya man its the only way. For instance, on Thursday (I think) I was trading the cable (as one of the 6 – 7 pairs I trade simultaneously). Suddenly I saw that the Cable had started dropping and dropping real fast and against my trade. Before I could say Benjamins it was 800+ pips the wrong way for me. But no sweat I said, knowing it will stop and turn and I will ride it back and above my entry level. Which is exactly what it did – netting me well over 1256 pips (cut my original trade shorter than intended after it turned positive). I found out the only way to survive here is to use your head. The pound that day and for sometime now has been bullish and therefore (1) will tend to close near the average for its current trend, and (2) all the lovely guys out there who trade the news help to reverse such moves with more or less the same momentum since they close their trades to take profit, plus (3) there is such a thing as oversold conditions(with more lovely traders out there waiting for a ride up). The second seemingly crazy thing about my approach is trading 6 – 7 pairs simultaneously and making profit on all. But all I did to make it work (at least this Friday – did not get 100% score on the other days but I was fine tuning all the time) was (1) establish the trend and tendencies for each and (2) establish correlations among the pairs and split them along the lines of pro and anti Dollar pairs. Then with the DXY in view I trade them (again based on Dow theory for how trends move – i.e., as the Buck was going down it will do some distance up and at that time I close pairs positively sympathetic to it and when the DXY turns down it is the turn of the others to bring me the dough. Sequencing is simple, pairs move up/down up/down up… so since the DXY had been going down (e.g. for this Friday) since yesterday – it had to go up first and then down. Now why am I telling you this? Because most of the ideas I used came from the school of pipsology. I have been back since reading basics like average pip movements, correlations, etc. I tried to play it like they tell you to and all I got was stop outs – so I decided to be myself and use my head and now I can tell you I made at least 9k this week this way (lost 5k though in the process of getting it right since it is an empirical process and I just started out) but at least I got in 100% this Friday and hope to keep it at that level knowing now what I know. Had to tell someone.

  • Darkdoji

    Just to clarify, this was for real money (just to get it right in my head) and yea I am 1k negative but still happy cos I know how that went and it will not happen again and also no one get confused about my statements on sequencing (that’s how I started out until today when it became clear that once you have the tendencies right they pairs will move uneven distances in the appropriate directions simultaneously). There are still issues with stops and take profit but basically most of the orders were closed manually and some hit their TP stops.

  • Darkdoji

    Hey Pips made lots of money this week – after I stopped reading all analysis and just stuck with the Dow theory (+ using my head) – the price will tell you, ya man its the only way. For instance, on Thursday (I think) I was trading the cable (as one of the 6 – 7 pairs I trade simultaneously). Suddenly I saw that the Cable had started dropping and dropping real fast and against my trade. Before I could say Benjamins it was 800+ pips the wrong way for me. But no sweat I said, knowing it will stop and turn and I will ride it back and above my entry level. Which is exactly what it did – netting me well over 1256 pips (cut my original trade shorter than intended after it turned positive). I found out the only way to survive here is to use your head. The pound that day and for sometime now has been bullish and therefore (1) will tend to close near the average for its current trend, and (2) all the lovely guys out there who trade the news help to reverse such moves with more or less the same momentum since they close their trades to take profit, plus (3) there is such a thing as oversold conditions(with more lovely traders out there waiting for a ride up). The second seemingly crazy thing about my approach is trading 6 – 7 pairs simultaneously and making profit on all. But all I did to make it work (at least this Friday – did not get 100% score on the other days but I was fine tuning all the time) was (1) establish the trend and tendencies for each and (2) establish correlations among the pairs and split them along the lines of pro and anti Dollar pairs. Then with the DXY in view I trade them (again based on Dow theory for how trends move – i.e., as the Buck was going down it will do some distance up and at that time I close pairs positively sympathetic to it and when the DXY turns down it is the turn of the others to bring me the dough. Sequencing is simple, pairs move up/down up/down up… so since the DXY had been going down (e.g. for this Friday) since yesterday – it had to go up first and then down. Now why am I telling you this? Because most of the ideas I used came from the school of pipsology. I have been back since reading basics like average pip movements, correlations, etc. I tried to play it like they tell you to and all I got was stop outs – so I decided to be myself and use my head and now I can tell you I made at least 9k this week this way (lost 5k though in the process of getting it right since it is an empirical process and I just started out) but at least I got in 100% this Friday and hope to keep it at that level knowing now what I know. Had to tell someone.

  • Darkdoji

    Just to clarify, this was for real money (just to get it right in my head) and yea I am 1k negative but still happy cos I know how that went and it will not happen again and also no one get confused about my statements on sequencing (that’s how I started out until today when it became clear that once you have the tendencies right they pairs will move uneven distances in the appropriate directions simultaneously). There are still issues with stops and take profit but basically most of the orders were closed manually and some hit their TP stops.