Weak spending in the UK in Dec, but GBP only reacting to Brexit these days
This morning's release of Dec retail sales comes in a weaker than expected, falling 0.9% on the month which was a little lower than forecasts. That said, we have spending data from Visa earlier this week which suggested the data would be soft, and we also have the Xmas period distortions in the numbers at this time of year which can produce erratic results.
Even so, the market is focusing on Brexit when it comes to GBP, and with parliament largely in unison over leaving the EU with some form of deal, the prospects of a hard Brexit are diminishing and GBP is slowly taking back some of its discount to fair value, which for Cable lies closer to the 1.4000 mark.
Last night we saw a surge towards 1.30000, though as we have noted through the week, this is a key point of resistance and we stopped sharply on the figure before subsequent consolidation then turned into a modest reversal. Spot has since stopped ahead of the 1.2900 mark, though the first notable point of support is in the mid 1.2800's, so it now depends on the markets view on the USD to a large degree.
We also see EUR/GBP sales having abated, with an aggressive move sending the cross rate towards 0.8700. Interim support kicked in at 0.8770-50, and we have duly based out here with a modest move back above 0.8800 since. 0.8930 is the major level to watch for here, though it will take some major news to drive the price back to these levels.