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EURGBP Hits Target 1 & UK Retail Sales Miss

Market Analysis

EURGBP, Daily               

The first of my LONG positions on sterling hit Target 1 yesterday, it was only for a minute or two but EURGBP spiked down to 0.8900 for a net gain of 116 pips. At the same time the EURUSD and EURJPY SHORT positions came within a few pips of also hitting target, but have both since retraced. The question is how do I feel about this? To be honest the spike to 0.8900 exactly and so quickly could be regarded as fortunate and the closeness of the other two trades could be unlucky. The trick is to treat all three situations the SAME, all the thinking and analysis is done before the post is put together and the positions are triggered. The EUR trades, having come so close to target, could easily now, with some positive news from Mr Draghi’s press conference reverse and move in the opposite direction.  Again the trick is to trust your analysis, trade what you see and NEVER risk too much on one single trade.

UK retail sales disappointed in September, coming in flat m/m from a revised 0.0% reading in August. The median forecast had been for a 0.4% m/m rise. The y/y figure was +4.1%, below the median forecast for 4.8% and down from August’s 6.1% y/y reading. Overall, while sub-forecast the data still paints a picture of a buoyant consumer sector, which has held up much better than many had feared following the Breixt vote. But, darker clouds are appearing on the horizon, with inflation generally seen as likely to shoot to around 3.0% by the end of 2017, which will likely erode household prosperity, along with higher energy prices. Then there is Brexit uncertainty, which has seen many firms putting investment and recruitment “on hold,” according to the EY ITEM’s Autumn report, while BoE bank agents surveys have showed businesses expecting Brexit to have a negative effect on capital spending, hiring and turnover.

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Stuart Cowell

Market Analyst


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