UK DATA: Sales lower on "inflation and customer cutbacks"; concern for MPC
- This is much more significant than most retail sales reports.
- Retail sales fell across all sectors, with good stores seeing the biggest falls and "other non-food stores" and "non-store retailing" seeing the smallest falls. The ONS notes that part of this pullback is due to the high April print that had been partly attributed to the good weather and the fall in May also being put down to consumer concerns about "inflation and customer cutbacks, alongside reduced sales of alcohol and tobacco products." Retailers also noted that there was reduced footfall in non-food stores and that customers had reported completing "home projects earlier than usual this year because of good weather."
- A pullback in retail sales had seemed inevitable at some point with sales volumes having reached their highest volumes since July 2022 in the data for April, and having surprised positively in each of the four preceding prints. Indeed, in volume terms this is still above levels seen in December 2024.
- However, despite the volatility in this series (and us normally advising to ignore one-off moves) we think the MPC will be a little concerned about the comments on "inflation and customer cutbacks".
- This wasn't a data release that the MPC had requested pre-release access to and for the ONS to have included this line in their commentary it must have been relatively widespread.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
BTP TECHS: (M5) Monitoring Support At The 50-Day EMA
- RES 4: 121.93 76.4% of the Dec 5 ‘24 - Mar 14 bear leg (cont)
- RES 3: 121.43 1.618 proj of the Mar 14 - Apr 4 - 9 price swing
- RES 2: 121.00 High Feb 7 (cont) and a key resistance
- RES 1: 120.72 High May 8 and the bull trigger
- PRICE: 120.02 @ Close May 20
- SUP 1: 119.18/00 50-day EMA / Low May 14
- SUP 2: 118.76/09 Low Apr 15 / 14
- SUP 3: 117.28 Low Apr 10
- SUP 4: 116.06 Low Apr 9
A bull cycle in BTP futures remains intact. However, near-term, a corrective phase continues to signal potential for a pullback. Key support at 119.21, the 50-day EMA, remains intact. A clear break of it would signal scope for a deeper retracement, and open 118.76 initially, the Apr 15 low. On the upside, a continuation of the latest bounce would refocus attention on key resistance at 120.72, the May 8 high. A break of this hurdle resumes the uptrend.
UK DATA: VED is much higher than expected - contributing to upside surprise
- It looks as though VED (road tax) is also a much bigger contributor here than expected - "OTHER SERVICES IN RESPECT OF PERSONAL TRANSPORT EQUIPMENT" contributed 0.23ppt to headline CPI. That's not the "fuels and lubricants" part. And again - around 0.45ppt to services CPI.
- That category rose 19.8%Y/Y - most of the sellside expectations we had seen had been for it to rise less than 10%Y/Y.
- That will largely remain in the Y/Y numbers for the entire year ahead, but will be looked through by the BOE to some extent as it's set by the government and not by supply/demand conditions.
USDJPY TECHS: Reversal Extends
- RES 4: 150.49 High Apr 2
- RES 3: 149.28 High Apr 3
- RES 2: 148.54/65 76.4% of Mar 28 - Apr 22 bear leg / High May 12
- RES 1: 146.16 50-day EMA
- PRICE: 143.76 @ 07:09 BST May 21
- SUP 1: 143.45 Low May 8
- SUP 2: 142.36 Low May 6
- SUP 3: 141.96 76.4% retracement of the Apr 22 - May 12 bull leg
- SUP 4: 139.89 Low Apr 22 and a bear trigger
USDJPY is trading lower today extending the reversal that started May 12. The pullback signals the end of the corrective cycle since Apr 22 and marks a resumption of the downtrend. A continuation lower would expose 142.36, the May 6 low. Note that the 20-day EMA, at 145.11, has been cleared, strengthening a bearish theme. Key short-term resistance has been defined at 148.65, the May 12 high. Initial firm resistance is 146.16, 50-day EMA.
