Global macro overview for 23/01/2017:
The UK Retail Sales data surprised market participants as they fell the most since April 2012. The Office for National Statistics reported that UK retail sales dropped 1.9% in December, worse than an expected 0.1% fall, while the November gain of 0.2% was revised down to –0.1%. This weak data will have an impact on the economic growth forecast for the last quarter of 2016. The reason behind this is the fact, that since June 2016 the British economy was growing mainly due to consumer spending. The second reason is a very high yearly shop price inflation that has reached 0.9%, the highest level since 2013. In conclusion, despite the good Chrismas sales period, major retailers are struggling as the sales are slowly diminishing, so the Q4 UK GDP report will be likely lower than market expectations.
Let's now take a look at EUR/GBP technical picture in the daily time frame. The recent lower low in the overall sequence might suggest the up trend is curretnly in a correcive cycle. The price is trading just at 100 DMA, just below the technical resistance at the level of 0.8672. The next technical support is seen at the level of 0.8446. If this level is broken, the next one is the all-important lower low at 0.8302.
