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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!