What’s behind the U.K.’s mixed economic reports today and how have they affected the pound’s price action? Let’s take a closer look.
Consumer spending in the U.K. fell by 1.5% in January after rising by a downwardly revised 2.5% in December. The drop not only disappointed analyst estimates but also registered as the fastest one since April 2012. In addition, the annualized growth rate only came in at 4.3%, lower than the 5.3% growth in December and 5.0% analyst expectations.
A closer look reveals that it was food and clothing sales that weighed on the report. Food sales fell by 3.4% in December while sales of clothing and footwear slipped by 3.5%. Last but not the least, non-store retailing, which includes online purchases, fell by 2.7% and printed its first decline since September.
Sales of household goods was the only bright spot as it popped up by 5.3% on increases in furniture and electrical goods purchases. The Office of National Statistics (ONS) also retained its optimism, saying that the 4.3% annualized figure still represents growth.
The U.K. government’s revenue exceeded its spending by 4.7 billion GBP in January as taxes from salaries and company profits weakened. The figure is lower than market expectations of an 8-billion GBP surplus and the 6- billion GBP surplus from a year earlier.
Market geeks are warning not to read too much into the disappointment as the report likely reflects prompt tax payments made last year. Remember that Treasury usually receives installments and final payments of income and corporation taxes from the previous year in January.
The Meh: Market Reaction
What’s probably most surprising about all these is the markets’ lack of reaction to them. After all, retail sales data is marked as a tier-1 report on our economic calendar and the government spending data is not far behind. And both reports were released at the same time!
GBP/USD only slipped by around 20 pips in the first five minutes of the release and recovered all of its losses in less than 30 minutes. Even cross pairs like GBP/JPY and EUR/GBP showed price movement.
Does this mean that traders simply aren’t interested in the reports? Or are they just waiting for momentum during the U.S. session when the U.S. retail sales numbers are printed? In any case, you should consider these newly-published data when you’re trading your GBP trades today!